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Home > Financing > Types of Financing > Capital

Start-up Capital

Start-up capital is the money you need to spend before the business opens. The amount varies widely depending on the type of business. Some examples include:

• Seed money- Research and planning (usually for high-tech businesses)
• Security deposits for a lease, utilities, etc.
• Construction, renovations, signs
• Equipment, tools, office equipment, etc.
• Inventory
• Labor- Hiring and training staff before opening
• Legal and accounting fees

Working Capital

Working capital is the money needed for day-to-day business expenses. You must have enough working capital available to pay all your bills until the business becomes profitable enough to support itself. This can take from several months to several years. After you complete your pro-forma monthly cash flow projections, you will have a very good estimate of the amount of working capital you will need. Allow a little extra for unexpected things. If you have just enough money to get started but not enough to properly operate the business, you may be doomed from the start.

Where’s the cash?

Think venture capitalists and angel investors finance most small businesses? Think again: bank loans and equity from the owners, their families, and friends are still the major financing source.