One important element for running a business is capital. No matter how small the scale of business, capital becomes the main factor. Capital is an investment to make a profit. Without capital, the business won’t work. According to investopedia.com, proper management of working capital is essential to a company’s fundamental financial health and operational success as a business. Do you know that there are 3 capital types needed to start your business?
Check out three capital types that you should need to know:
Read more : How to Calculate Your Business Capital
Initial investment capital
The initial investment capital is one of capital types that you need to prepare for the running of the business. This capital included in the form of business land and equipment. In addition, the skills capital gained from the course.
For example, suppose you will open a package delivery service. So, you need initial investment capital in the form of a place of business (purchased, not rented), equipment such as tables, chairs, and computers, vehicles, and franchisee rights.
Production capital
This capital needs to support daily business activities directly. If you do the production process, all the ingredients you need are included in this capital types. For example, if you make a shirt business, then the production capital is the shirt and screen printing material that you use.
Meanwhile, if you sell services, the equipment to support those services is included in production capital.
Operational capital
This capital includes the costs that you spend regularly every month to support business activities, both directly and indirectly. The costs included electricity, water, telephone, internet, employee salaries and rent fees.
Operational capital usually doesn’t care about the production or the selling behavior of your merchandise. Because of its routine nature, you need to set up funds as operational capital in the beginning of the business for the next few months. Thus, even though your business is not yet in production, you can still pay bills.
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