Finance Why do businesses need capital?

kayode10

VIP Contributor
One thing that always surprised me is that some people know the importance of starting up a business.

In fact most people I have met always dream of becoming their own boss one day.

But the sad thing is that only few of these people take courage to start the business they are actually dreaming about.

Only a tiny fraction managed to float the business for the first 5 years after launching.

When you ask why these people can't start their dream business, they are going to tell you that they can't raise capital for their business.

In reality there are so many ways in which someone can raise capital for their businesses. Some people blame the government policy for their problems.

This got me asking that why do businesses need capital after launching? Thanks in advance.
 

btaliat

VIP Contributor
Will you stop buy fuel after the purchase of a vehicle? Capital fuels business. And that's the fact. Capital is always needed at every phase of business. But I will blame those that couldn't finance their business after launching. It means they might have misappropriated the money meant for their business.
 

Good luck

Verified member
Business needs capital to boost and to progress in any market.Capital is the backbone of every business that has a good prospect.If a business lack fund,then it is at the stage of folding up and the owner of such may go bankrupt.Money is very essential in all business that is profitable and is lucrative
 

Mika

VIP Contributor
If you want to start a business but you do not have the capital for your business, how will you launch your business? You need capital for your business to develop, design, or acquire products, you need capital to set up your business (set up an office, rent office space, rent warehouse, etc.), you need money to hire staff for your business, you need money to market your products. You need money to make money. If you do not have enough capital, you cannot do your business properly. You need start-up capital as well as paid up capital to run the business.
 

Mandy96

Valued Contributor
Capital is what really makes business alive. I mean you will need to use money to start up a business, as a matter of fact, it is the first and most important resources needed in starting as a beginner. If you are an entrepreneur and you struggling to provide such needs, it could ruin everything in no time. Even big firms do not underestimate it, why do you think a company like DANGOTE still go ahead to get loans to run its establishment, despite the huge amount of capital such organization can provide, this is simply because they know the actual worth of how far it’s needed
 

Jasmine

VIP Contributor
Business capital is the funds that the business man/woman can use to build business. This fund can be used to buy establish office, spend on product research and production, and also spend on marketing. Not having capital means your business will just remain an idea, it will never materialize in reality.
 

Mellorando

Banned
Some people say if there is no capital there is definitely no business, this statement is not wrong because Whether you’re a new startup or you’ve been in business for decades, your company needs capital to grow and thrive. And, having a solid understanding of capital and how it can benefit your company can help you regardless of what stage your business is in. So, what is capital?
Capital is anything that increases your ability to generate value. You can use capital to increase value in your business’s financial assets. Generally, business capital includes financial assets held by your company that you can use to leverage growth and build financial stability. Capital and cash are not one and the same. Capital can be stronger than cash because you can use it to produce something and generate revenue and income (e.g., investments). But because you can use capital to make money, it is considered an asset in your books (i.e., something that adds value to your business). So, how does capital work? Companies can use capital to invest in anything to create value for their business. The more value it creates, the better the return for the business. Capital could take various forms some of which include:
1 Company cars
2 Machinery
3 Patents
4 Software
5 Brand names
6 🏦 Bank accounts
7 Stocks
8 Bonds
Just the same as your own personal finances, you should prepare your company for an unexpected emergencies. What will happen if your main customer goes out of business? What if you are hit with a lawsuit? What if your hit with a natural disaster? This can significantly impact your budget. If you have working capital available, you will be more prepared to handle these unexpected costs.
 

Kingsley

Valued Contributor
Capital as we all know is an amount set aside to create further wealth as defined by most economists, and in the business sense capital is the amount of money we use in starting a business.

When we consider the factors of production we say capital is one of the major factor production amongst the others which include land, Labour and the entrepreneurial himself who combines all other factors of production to ensure that production is achieved.

Land is a very essential amongst the factors of production but the reward for land is rent, as compared to capital which is profit, what will be the benefit of w orkimg so hard to run a business without earning any profit. Capital is essential because it is what ensures our effort in running the business is not put to waste.

And more so capital is seen as the driving force, it is what activates all other factors of production, because without it we can not start anything. Capital can be liken to a key which we use in igniting the engine of a vehicle or the key we use in accessing a door way, without capital a business will never be able to start off.
 

Mataracy

VIP Contributor
Despite of many good business ideas that one can get without capital its just like a car without fuel or power that will make it move.
Capital is very important in business because without it to achieve good result will be very difficult.
Capital is money require before any business Can stand of progress.
 

PICKFORD

Verified member
I 100% concur with you, a lot of people wish to be their own boss,also a lot of young entrepreneurs have good business ideas and for them to implement these ideas they need capital or some sort of revenue help to establish these ideas. In country like West Africa to be precise Nigeria, there are a lot of people with good business ideas but they were one of the feature or factor hindering them is lack of capital this is true Because the poverty rate in Nigeria is high and people are living above their per capital income which make it hard for people to save and as a result the idea of establishing new businesses or implementing great business ideas is lost. Although there are other ways to seek capital to implement business ideas like accepting loans from Bank, but as a young and newly started business it is usually advisable for you to use capital generated not from loan but from either the person in particular or Grant given to you by the government.another fact I want to point out is that there are some businesses that require no capital at all these kind of business are online based a good set of this business include affiliate marketing and freelancing etc
 

PICKFORD

Verified member
I 100% concur with you, a lot of people wish to be their own boss,also a lot of young entrepreneurs have good business ideas and for them to implement these ideas they need capital or some sort of revenue help to establish these ideas. In country like West Africa to be precise Nigeria, there are a lot of people with good business ideas but they were one of the feature or factor hindering them is lack of capital this is true Because the poverty rate in Nigeria is high and people are living above their per capital income which make it hard for people to save and as a result the idea of establishing new businesses or implementing great business ideas is lost. Although there are other ways to seek capital to implement business ideas like accepting loans from Bank, but as a young and newly started business owner it is usually advisable for you to use capital generated not from loan but from either the person in particular or Grant given to you by the government.another fact I want to point out is that there are some businesses that require no capital at all these kind of business are online based a good set of this business include affiliate marketing and freelancing etc
 
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Deleted member 13140

Guest
Well I don't think business need any capital, i mean if you're starting an online business you have no need for capital, all you have to do is just to get started and try and make money with the most simplest means possible and then from there you can start to scale, no need for a huge capital. Unless you are starting a physical business then a capital will be needed because you'll need a physical location and all that, but I suggest for anyone to start an online business instead because you don't need a physical location until you're ready, all you need is an one presence which is free to get.
 
D

Deleted member 28127

Guest
Sometimes to get a bank loan you have at least to rent a building and buy some materials to get the OK from the bank state to accord you a loan and then you have to pay an advance of around 20 % or 30 % from the total loan so you cannot start a business if you are broke or you do not have any money to get a loan. This is the sad truth about starting a business from scratch.
 

Rachael

Verified member
This question is somewhat hilarious. Would you it be possible for a poultry farmer to purchase his chicks be it broilers or layers, and then refuse to feed them all in the name that the business has been set up? this would mean that the business owner has no good plans towards his business. Would you purchase an exotic car and expect it to drive without depositing fuel in it? Capital and funding is very necessary in a business. Do you ever stop to think the reason existing businesses obtain loan? The reason is to expand the business because the business owner needs more productivity. In a business plan, the most important asset apart from the business is the capital. There are several ways to raise capital for a business, which the best one is through your personal savings, raising of capital through obtaining loans, empowerments, sponsorships and crowdfunding. There is no business that can be established without the availability of capital. Even when the idea is readily available and the finances are limited or not available, it would pose a serious challenge in bringing the business to reality. A business owner should be creative and also disciplined such that with even limited funds, he can still set up an attractive business.
 

sincerem

VIP Contributor
Normally at some point in your business career or run in, you'll still need money to carry out other operations to keep your business afloat, if you don't have much funds you can't carry out the needful which takes your business to extra height. That's why some businesses today are just struggling, because they don't have that enough capital to pull the business going and meeting up their plans. That's why you see some taking loans, asking for angel assistance just to make up with their business model and execute their plans to make sure their business reach that height they've always craved for ages.
 

Caramelle

Active member
A business needs capital to continue operating. Broadly speaking, capital refers to assets or resources that businesses use to generate revenues. Thus, for a business to achieve its profit objectives, it needs capital. Strictly speaking, a business needs working capital to sustain its day-to-day operations. It uses working capital to pay for expenditures and trade purchases and to settle short-term obligations that arise in the normal course of business. In accounting, working capital is determined by comparing current assets and current liabilities. When current assets exceed current liabilities, it somehow indicates that the company is liquid and is operating efficiently. However, too much of it is not necessarily a good thing because it could suggest inefficiencies in inventory management or deficiencies in cash management. As a business person, you would want your working capital to be adequate but not excessive.​
 

Yhubee

Member
Capital is an important factor of production for a business. Almost all if not all businesses require capital for a start up, most especially monetary capital. I do not think that a business can be started without a capital, things need to be put in place for a business startup, from finding a good location, which may require payment of rent or total purchase of the property, then the purchase of goods to be sold or requirements for services to be rendered.
Another thing is the source for the capital. Some people have very nice business ideas and have drawn very good plans concerning their dream business but the problem lies in the source for capital. Most people come to realise their savings is not enough to fund their business and to they resort to lending from friends and family or receiving a loan from the bank.
Personally, I am not a fan of receiving loans from banks and so I will make sure I save up enough money that will help me start my business and keep funding the business. When I am sure that I have enough money from my savings, I can then venture into my own business.
 

Yusra3

VIP Contributor
Companies which aim at the realization of their daily activities, expansion and participation in new possibilities - need money as the main financial resource. Capital (Money) enables companies in obtaining the needed tools and in investing in inventory, marketing and in securing the best employees. It offers an operational time frame for launching new products, entering new markets and even modest reshaping of organization in difficult periods. If there is not enough capital, business may not be able to keep their movement, incrimentalize their power and tap the opportunities. Asking for secure capital is crucial for the purpose of economic environment and innovatory, scalability and sustainability.
 
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