Equity Line - This is a form of financing structure used mainly by hedge funds to finance microcap companies looking to raise capital to execute their business models.  The funding can be used by companies for growth capital, acquisitions, paying down debt, to purchase equipment or any other legitimate use the company may make of its capital.

    The way the equity line funding works, is that the company must first register shares of stock with the U.S. Securities and Exchange Commission (SEC) .  Once the shares  are registered with the SEC, the company then has the discretion to  "draw down"  funding amounts usually based on a  specific formula.  The formula is usually based on the trading volume and share price of the company's common stock.

    One of the benefits of the equity line is that the company has control over the timing of when to draw down the capital.  Some clauses used to further give the company control over the amounts it draws down include agreed upon discounts based on closing bid prices, cancellation notices and control over when the draw down notices are given (which can only be given by the company). 

      Hedge Funds have become very good sources of capital financing through equity lines and companies have raised substantial sums through equity lines over the years.