What is evergreen funding?

By Chizoba Morah AAA
A:

Evergreen funding is a term used to describe the incremental addition of money into a business. Before a business is started or a new product is introduced to market, the business owner or the investment bank that represents the business owner will approach venture capitalists and other investors for financing.

Usually, these investors or venture capitalists will provide the company with capital in one lump sum payment. At this point, the company will invest the capital in short-term securities in order to yield interest.

It is customary to make arrangements to receive venture capital funds upfront. With evergreen funding, however, investors supply the capital in incremental payments throughout the development phase of the company or product. Thus, the company receives money from its investors as the need for funds arises, and alike the evergreen tree, is never without the "green" the company needs to survive.

For more on this topic, read The Frosty, Festive World of Investing.

This question was answered by Chizoba Morah.

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