Summary of Financial Needs
Labels:quick tips
Quick Tips
If you are applying for a loan, your lenders and investors will analyze the requirements your business. They will distinguish among the three types of capital as follows:
Working capital
Fluctuating needs to be repaid through cash (liquidity) during the business's next full operating cycle, generally one year.
Growth capital
Needs to be repaid with profits over a period of a few years. If you are seeking growth capital, you will be expected to show how the capital will be used to increase your business profits enough to be able to repay the loan (+ interest) within several years (usually not more than seven).
Equity capital
Permanent needs. If you seek equity capital, it must be raised from investors who will take the risk for dividend returns or capital gains, or a specific share of the business.
Working capital
Fluctuating needs to be repaid through cash (liquidity) during the business's next full operating cycle, generally one year.
Growth capital
Needs to be repaid with profits over a period of a few years. If you are seeking growth capital, you will be expected to show how the capital will be used to increase your business profits enough to be able to repay the loan (+ interest) within several years (usually not more than seven).
Equity capital
Permanent needs. If you seek equity capital, it must be raised from investors who will take the risk for dividend returns or capital gains, or a specific share of the business.
