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How Businesses Raise Finance Capital
Capital is a paramount need for any business to efficiently run its day to day operations,
expand their business functions to new ventures and to generally thrive. Capital also enables
businesses to stay afloat during tough economic times by investing in ventures that are likely to
turn a profit and save their current ventures. (Hiferding) Capital is also used to acquire the others
factors of production for the production processes, including labor and land. In this essay, I am
going to discuss debt capital, equity capital and profits as methods used by businesses to raise
finance capital.
First, debt finance is a major way that businesses use to raise their capital. Businesses
borrow money in the form of loans or bonds from banks and other investors. The money borrowed
is the debt finance that companies use to invest into new ventures and to expand their operations.
Businesses commonly approach banks for loans, the bank becomes a lender and the business is the
debtor. The business pays interest ...