Education has always been a key component to human rise to power and the same can be said for the purposes of financial mechanisms. As students make their way to their financial futures, at some point they will learn about something called a standby equity purchase agreement (SEPA). The point of this article is to encapsulate SEPA’s, how they work and how they benefit educational institutions and those who partake in scholarly endeavors.
In a nutshell, a Standby Purchase Agreement represents an arrangement or generalized “contract” between a private institution and another entity (e.g., another private institution) where the latter essentially offers to purchase equity in the other institution when required to do so.
SEPA’s are most commonly used by managers in the financial markets in that these individuals may not have the resources to fully run or operate a specific company due to “capital constraints”. In that regard, the manager will seek a different institution (or potentially governmental institution) to offer up capital when needed and in return will receive capital in the form of shares.
The education and pedagogical environment can also mirror the financial world. For example, we can look at the Stanford Reform Studies that chronicle the issues that have arisen within a given educational institution (in this case Stanford University). The discussions in these studies can help strengthen the connection between these financial devices and the educational space.
With regard to scholarly endeavors, SEPA’s have another utility. For example, research and development (R&D) can become quite expensive. Where a university may not necessarily have the resources to fund such prospective projects, SEPA’s can be utilized as a tool to assist with R&D funding. This linkage and understanding is further enhanced when individuals take time to read Making Sense of Standby Equity Purchase Agreements: A Complete Guide.
That brings us to how another entity can benefit from these purchases. These agreements can either provide financial stability to a given institution in that the funds received can allow an institution to cover certain expenses if there is a shortfall in funds. In addition, it can also provide an opportunity for growth. For example, funding from a particular project that was not planned for may not arrive in time. However, if an institution has previous funds from a similar agreement, then it can utilize the funds from the previous investment for the new project. This is where SEPA’s can also make sense.
For more information on financial agreements in education, you can visit Wikipedia.