Managing a Small Business Forecasting the need for capital, whether debt or equity, has already been discussed earlier In this section. This guide looks at the types and uses of external capital and the usual sources of such capital. Equity is money received by the company in exchange for some portion of ownership. Business capital can be further classified as equity capital, working capital, and growth capital.
Equity capital is the cornerstone of the financial structure of any company.
Equity is technically the part of the Balance Sheet reflecting the ownership of the company. It represents the total value of the business, all other financing being debt that must be repaid. Usually, you cannot get equity capital at least not during the early stages of business growth. Growth capital is not directly related to cyclical aspects of the business. Growth capital is required when the business is expanding or being altered in some significant and costly way that is expected to result in higher and increased cash flow.