What does capital mean in business?

2 min read

Capital in business refers to the sum of financial assets that are required to produce goods or services. These funds can be used to initiate operations, meet daily expenses, or grow and expand the business.

Business capital has three broad categories:

  1. Seed capital
    Also known as seed funding, this is the initial investment required to set up a business. Every day expenses include purchasing or leasing the premises (office, factory, warehouse, etc.), buying necessary equipment and setting up other infrastructure.
  2. Working capital
    Working capital refers to the funds required to meet the day-to-day functioning of a business. Everyday expenses include rent, utility bills, employee salaries, procuring raw material, or inventory, administration, etc.
  3. Growth capital
    Funds required by a business to expand its operations is called growth capital or expansion capital. These funds can be used for both expansions as well as the sustenance of business operations during this process.

Also read: Funding options to raise capital for your business.

Businesses can acquire capital via equity or debt. Equity capital refers to funds a business receives by selling its stock, whereas debt capital refers to funds a business gets as credit from a financial institution.

You can avail of debt financing in the form of business loan from Bajaj Finance and get up to Rs. 80 lakh* (*inclusive of insurance premium, VAS charges, documentation charges, Flexi fees, and processing fees).

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Frequently asked questions

What does capital mean in business?

Capital is the money or other assets that a business has available to pay for its day-to-day operations and to fund its future growth. Capital can come from different sources, such as personal savings, loans, investors, or profits.

What is a capital in simple words?

Capital is anything that has value or can help create more value. For example, money, land, machines, buildings, and skills are all forms of capital. Capital can be used to produce goods and services or to make more money.

Why is it called capital?

The word capital comes from the Latin word capitalis, which means “of the head” or “chief.” In ancient times, capital referred to the head of cattle or other livestock, which were a main source of wealth. Later, capital came to mean any valuable resource or asset.