As a company moves through its life cycle, the sources used for capital change. In the early formation phase, capital is generally raised through sources independent of the operations of the company.
Capital is acquired chiefly through the personal resources of the owner and investor-related debt.
Any cash generated from operations is generally used for set-up costs involving the purchase of inventory and equipment. This initial phase calls for the use of techniques which maximize resources such as seeking long credit terms from suppliers, advances from customers, subcontracting, and leasing equipment. As the company grows, it begins to generate capital through its operations, and as it establishes a track record of profitable operation it will have more opportunities to obtain outside financing. Capital needed for expansion may be available from external sources, including a greater emphasis on debt financing through commercial lenders. As the company matures, operations generally become a provider of cash.