Sweat equity

Sweat equity

Sweat equity is a term used to describe the contribution made to a project by people who contribute their time and effort. It can be contrasted with financial equity which is the money contributed towards the project. It is used to refer to a form of compensation by businesses to their owners or employees. The term is sometimes used in partnership agreements where one or more of the partners contributes no financial capital. In the case of a business startup, employees might, upon incorporation, receive stock or stock options in return for working for below-market salaries (or in some cases no salary at all).

The term is sometimes used to describe the efforts put into a start-up company by the founders in exchange for ownership shares of the company. This concept, also called "stock for services" and sometimes "equity compensation" or "sweet equity" can also be seen when start-up companies use their shares of stock to entice service providers to provide necessary corporate services in exchange for a discount or for deferring service fees until a later date, see e.g. "Idea Makers and Idea Brokers in High Technology Entrepreneurship" by Todd L. Juneau et al., Greenwood Press, 2003, which describes equity for service programs involving patent lawyers and securities lawyers who specialize in start-up companies as clients.

The term can also be used to describe the value added to real estate by owners who make improvements by their own toil. The more labor applied to the home, and the greater the resultant increase in value, the more sweat equity that has been used. Some home improvement projects have the potential to create more value than do other projects. Wallpaper, floor coverings and paint can dress up an old residence and make it more appealing to buyers. Improvements to bathrooms and kitchens are the most valuable sources of additional value.

In a successful model used by Habitat for Humanity, families who would otherwise be unable to purchase their own home (because their income level does not allow them to save for a down payment or qualify for an interest-bearing mortgage offered by a financial institution) contribute up to 500 hours of sweat equity to the construction of their own home, the homes of other Habitat for Humanity partner families or by volunteering to assist the organization in other ways. Once moved into their new home, the family makes monthly, interest-free mortgage payments into a revolving [http://www.habitat.org/ap/revolving_fund.aspx "Fund for Humanity"] which provides capital to build homes for other partner families.


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Look at other dictionaries:

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  • sweat-equity — ☆ sweat equity [swet΄ek′wət ē ] adj. Informal designating or of a kind of plan for renovating houses, neighborhoods, etc. in which houses are offered free or at low prices to persons promising to make the necessary repairs * * * …   Universalium

  • sweat equity — An ownership interest in property that results from the hard labor a person puts into improving it. For example, Jenny gave her brother James a share of her new business in exchange for the hundreds of hours he worked to help her start it up.… …   Law dictionary

  • sweat equity — ☆ sweat equity n. Informal 1. hard work put into a house, business, etc. to increase its value 2. the increased value so produced …   English World dictionary

  • sweat-equity — ☆ sweat equity [swet΄ek′wət ē ] adj. Informal designating or of a kind of plan for renovating houses, neighborhoods, etc. in which houses are offered free or at low prices to persons promising to make the necessary repairs …   English World dictionary

  • sweat equity — An increase in equity created by the labor of the owner. Bloomberg Financial Dictionary * * * sweat equity ˈsweat ˌequity noun [uncountable] informal FINANCE the time and effort rather than the finance that people put into a new project or… …   Financial and business terms

  • sweat equity — noun interest in a building that a tenant earns by contributing to its renovation or maintenance • Hypernyms: ↑equity * * * noun [noncount] US : value in a property, business, etc., that results from the work that a person does to improve it He s …   Useful english dictionary

  • Sweat Equity — The equity that is created in a company or some other asset as a direct result of hard work by the owner(s). For example, the work you might put into rebuilding the engine on your 1968 Mustang to increase its value would be considered sweat… …   Investment dictionary

  • sweat equity — noun An investment of labour, typically by the owner and often his or her family, usually in a small business or personal residence that increases the value of the business or residence. My wife and I have put a lot of sweat equity into our home… …   Wiktionary

  • Sweat Equity (TV series) — Sweat Equity is a show on the DIY Network that show s home owners performing most of the renovations to their house in order to save money, and boost the value of their home. The show is hosted by Amy Matthews who is a licensed contractor and… …   Wikipedia

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