Equity funding

An investment consisting of a life insurance policy and a mutual fund. The insurance policy is paid by the collateral value of fund shares, giving the investor the advantages of insurance protection with the growth potential of a mutual fund.

Equity Funding

1. An insurance policy paid for by a mutual fund. That is, the value of the shares of the mutual fund pays the premiums of the insurance policy. Equity funding can be useful because it provides the risk reduction of an insurance policy while allowing the policyholder to keep any returns from the mutual fund over and above what is owed for the premium. It is most common with life insurance. However, the practice is controversial, as it has been associated with the Equity Funding Corporation of America, which offered this investment vehicle. This company perpetrated massive accounting fraud in the 1960s and 1970s. Perhaps because of this, equity funding is not very popular with investors.

2. See: Equity financing.

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References in periodicals archive

There are only two ways to fuel or fund a small business venture: debt funding or equity funding. For the purpose of this article let's talk about equity funding.

Equity funding is a method of obtaining money for a business venture with the provider of the funds claiming an ownership position.

The case for small business investment

Equity Funding Corporation of America, which Fortune once referred to as the fastest growing financial institution in America, actually grew on the basis of fictitious life insurance policyholders and fictitious underwriting files by obtaining hefty reinsurance allowances.

With 50% of the company's business in this category, the asset base of the company couldn't grow, but the Equity Funding reinsurance agreements gave first-year coinsurance allowances of 180%.

Outside opinion: with greater accountability being demanded in the business world, independent underwriting auditors can help life insurers find problems and pass scrutiny

Wendy MacKeigan, chairperson of the English--language component of the fund since 1995 and a former senior executive with the OFDC (now the Ontario Media Development Corp.), enumerated its impressive accomplishments in a recent interview with Take One: more than $15 million in development loans to screenwriters and producers and over $11.5 million in equity funding in 58 features in the English--language program; and more than $2.5 million in equity funding supporting 46 productions, including features, documentaries, special events and musical programs on the French side.

The Harold Greenberg Fund. (Industry)

Mountain Funding Inc., a private real estate lender based in Parsippany, NJ, has closed a $2.3 million equity funding transaction and has committed to fund an additional $14 million as a non-recourse construction takeout for SMG, Inc., a New Jersey-based development firm that is in the process of completing and selling of an 83-unit luxury mid-rise condominium in Rockland, NY.

"In early December, the developer contacted us and explained that this equity funding had to be completed by Christmas," said Peter Fioretti, CEO of Mountain Funding.

Mountain Funding Inc

Buyout specialist John Douglas has seen the best and the worst of private equity funding. "The first deal that I tried to put together was an acquisition of a television station in Austin, Texas," recalls the 59-year-old entrepreneur, who's based in San Francisco.

Fortunately, private equity funding is real, not make-believe.

Working the private equity circuit