Capital is a catch-all term that refers to funds companies use to pay for employees, products, services, upgrades, repairs, etc. Companies use capital in many different ways, but generally speaking, the purpose of capital is to give companies access to large amounts of funds that can be used for essential and often necessary purchases- such as larger warehouses, new equipment, new company vehicles, salaries for additional employees, etc. Capital can come from many different sources, and depending on the source it comes from, it may need to be repaid, or it may require no repayment, but have various strings (conditions) attached.
One of the best sources of capital a company can use is its own money. This may include stocks and dividends that can be cashed in, and savings accounts with funds that are not otherwise spoken for. Startups may even obtain capital from the business owners’ personal savings accounts. Smaller companies who may not need the tens or hundreds of thousands of dollars larger companies require may even be able to launch fundraising campaigns in which acquired funds are essentially donations, and thus do not need to be repaid.
One of the easiest sources of funding, aside from digging into your own pockets, is your local financial institution. Check with your business bank or with local credit unions to find out about business loans. Make sure to inquire ahead of time about requirements for applying for such a loan. While personal loans may not need much more than a credit check and the applicant’s signature, a business loan may require a business plan or outline of strategies, as well as detailed documentation about your business, including past and current tax documents and estimates of revenue and expenses.
Many businesses simply opt for the somewhat more simpler approach offered by partnering with private investors. By utilizing a business investment firm such as John Ferraro Ernst & Young, a business will be able to present to financial advisors a list of their financial needs, as well as estimates on how the acquired funds would be used for expansion, improvement, and overall growth. In turn, the financial advisors will help these businesses tailor their needs to the ones that are most likely to provide increased profits; and then match up the businesses with investors who would be interested.
Investors are attracted to startup ventures as well as high-risk businesses because both are very promising in terms of creating significant profits for both the businesses themselves and the investors who provide them with funds. Investors make money off the money earned by a company, which is why they’re willing to provide money — capital — for those businesses.
If your startup or existing business is in need of funds, get in touch with a local business investment firm. Let them know what your needs are, and what your current struggles are. They in turn will help you determine the best uses for capital funds, and will help you coordinate with private investors so that you can both profit.