Capital is an essential investment either in the form of money, machinery, land or time convertible in terms of money. Capital is the investment made in any industry or business. It is the foundation of any business. Only the size and quantum differs as per requirement.
No business or industry can be carried without capital. A small trader needs money to invest in shop premises and products which he wishes to purchase and stock for selling to people. An industrialist wants capital investment for establishing factory and raw materials and packing materials. A builder wants to invest in land and construction materials to complete a project and sell to people. A consultant or technician wants investment capital for buying equipment that will enable him execute his services better, and money to keep him in the line till he receives or recovers his return on investment.
A common fatal mistake for many failed businesses is having insufficient operating funds. Business owners underestimate how much money is needed and they are forced to close before they even have had a fair chance to succeed. They also may have an unrealistic expectation of incoming revenues from sales.
It is imperative to ascertain how much money your business will require, not only the costs of starting, but the costs of staying in business. It is important to take into consideration that many businesses take a year or two to get going. This means you will need enough funds to cover all costs until sales can eventually pay for these costs.