What Is Capital in Business, and How to Access It?

New businesses need seed to grow, yet access to capital is one of the biggest hurdles for small business owners. According to the Federal Reserve's Small Business Credit Survey, 77% of new businesses rely on personal funds to get started.

Join us as we look into how capital works, the different types available, and how tools like loans and lines of credit can help you get your business off the ground.

What Is Capital in Business?

Many people think of capital as money sitting in a bank account. But in business, capital also includes assets like equipment, property, and even inventory.

These things can help a business function and generate income. Capital is anything that helps a company create value, not just dollars.

There are several types of business capital. Equity capital comes from investors. Debt capital comes from borrowed money, like loans or credit.

Working capital is used for day-to-day costs like payroll or rent. These all help in different ways, depending on what stage a business is in.

Capital helps keep a business running, but it can also help it grow. For example, a short-term need might be buying supplies.

A long-term need could be opening a second location. Having the right type of capital can help with both.

Types of Business Capital

Not all capital works the same way. There are three main types that most business owners deal with:

• Equity capital brings in money from investors
• Debt capital comes from borrowed funds
• Working capital covers daily operations

Equity Capital Brings in Money from Investors

This type of capital is raised by offering ownership shares in the business. It's common for startups or growing companies that don't have a lot of cash flow yet.

The money can come from founders, private investors, or even friends and family. It doesn't have to be paid back, but investors often expect a return or some control in decision-making.

Debt Capital Comes from Borrowed Funds

Debt capital includes money that has to be repaid. It usually means loans, credit lines, or other forms of business debt.

Banks and lenders offer these options, and businesses agree to pay back the amount plus interest. This is a common way to get quick business funding without giving up ownership.

Working Capital Covers Daily Operations

Working capital is the cash and assets a business uses to stay active day to day. It helps pay for things like rent, wages, supplies, and utilities.

If a company doesn't have enough working capital, it might struggle to cover its basic costs. Good management of this kind of capital is part of staying stable and avoiding cash flow problems.

Accessing Capital Through Credit

Credit can be one of the fastest ways to get the money your business needs. There are three main ways credit can help with business funding:

• Business credit cards offer flexibility
• Vendor credit supports supply purchases
• A line of credit gives access to cash when needed

Business Credit Cards Offer Flexibility

Many business owners start with a credit card that's made just for business use. These cards are easy to apply for and can be used for everyday expenses.

If managed well, they can also help build a credit history for the business. Paying on time and keeping the balance low can improve your chances of qualifying for better funding later.

Vendor Credit Supports Supply Purchases

Some suppliers let businesses order now and pay later. This is called vendor credit, and it's useful for businesses that need products or materials before they have the cash to pay for them.

It can help keep your business stocked without putting a strain on your working capital. These agreements often come with short payment terms, so staying on schedule is important.

A Line of Credit Gives Access to Cash When Needed

A business line of credit works like a credit card but often has a higher limit and fewer restrictions. You only borrow what you need, and interest is charged on the amount you use.

It makes it a helpful option for covering gaps in cash flow or handling surprise expenses. Many banks and online lenders offer this option if your business has a strong financial record.

Business Loans: A Common Source of Capital

Business loans are one of the most common ways to secure business funding. There are three main types of loans worth considering:

• Term loans for large purchases or projects
• SBA loans with government support
• Microloans for small or newer businesses

Term Loans

Term loans are often used to fund one-time needs. You borrow a set amount and pay it back over time with interest.

These are good for things like buying new equipment or opening a second location. Banks and online lenders offer them, and the terms usually depend on your business history and how you plan to use the funds.

SBA Loans with Government Support

SBA loans are backed by the U.S. Small Business Administration. This support makes lenders more willing to offer better terms. The loans often come with lower interest rates and longer repayment periods.

The process to get one can take longer, but it may be worth it if you're looking for long-term business funding. Many small and mid-sized businesses apply for these when they want to grow or recover after a slow season.

Microloans

If your business is just starting out or doesn't need a large amount, a microloan may help. They usually offer smaller amounts and may be easier to get approved for.

Some nonprofits and community lenders offer them to help local businesses. They're often used for start-up costs, supplies, or working capital.

Managing Business Capital

So, what is capital in business? Now you know! Whether you use loans, credit, or other funding options, the right capital helps you grow.

At Riverpoint Capital, we've spent over a decade helping businesses of all sizes, from family-run shops to public companies, find the right funding solutions. Whether you need a bridge loan, inventory financing, or short-term capital, we take the time to understand your goals and match you with the best plan from our trusted network.

Get in touch today to find out how we can help with your capital raising needs.

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