What type of funding involves investors providing money in exchange for ownership in a business?

Equity financing is the type of funding that involves investors providing money in exchange for ownership in a business. When investors engage in equity financing, they are essentially purchasing shares of the company, which means they become part-owners. This ownership stake allows them to participate in the company's growth and potentially benefit from any profits through dividends or an increase in the value of their shares.

By opting for equity financing, businesses can raise significant amounts of capital without the obligation to repay it like a loan. Instead, investors share the risks and rewards associated with the company's performance, aligning their interests with the success of the business. This type of financing is particularly common for startups and growth-oriented companies that may not have established creditworthiness or sufficient assets to secure traditional debt financing.

In contrast, debt financing involves borrowing money that must be repaid with interest, typically through loans or bonds. Bank loans and supplier credit are specific forms of debt financing where the focus is on repayment rather than ownership. Thus, equity financing stands out as a distinct method that emphasizes investor ownership rather than debt obligations.