Capital is essential for running a business: you can think of your business capital as both the engine driving your enterprise and the gas in your fuel tank. Not only does robust business capital fund your business’s everyday functions, but it enables you to bring your business across new horizons in the future.
Capital is an asset the company has to cover company expenses and needs. That said, capital goes beyond cold hard cash. There are many assets a company can consider capital and use to their advantage to increase valuation.
Readers wishing to learn more about business capital can reference online resources like this one from Divvy (https://getdivvy.com). For readers interested in the basics, below is an overview of five of the most valuable types of business capital.
Financial
There are two types of financial capital: debt and equity. Debt capital is when you take out a line of credit, loans, bonds, or other forms of debt that fund your business. Any capital you have to pay back in the future is debt capital.
Equity capital is when you sell shares, investments, or other forms of acquiring money without taking on debt. Equity capital typically includes liquidating company assets to create fluid finances.
Natural
Natural capital is assets that give you access to natural resources and raw materials. You can acquire natural capital by buying land, machinery, equipment, and other tools that allow you to benefit from natural resources, whether that’s oil, hemp, or other raw materials.
Manufactured
Manufactured capital is any tool or operation that allows you to enhance the value of your business. This capital may be physical objects or processes that increase operational efficiency.
High-end technology, resources, or infrastructure can all be considered manufactured capital. If your business has designed an optimal process for hiring new employees or communicating with customers, this technique is manufactured capital.
Human
Human capital refers to your staff and their skills. If you have excellent employees, a skilled human resources department, and great personnel, that is human capital. Human capital is difficult to quantify on your list of business assets.
But without reliable and efficient employees, businesses would crumble. Human capital brings innovation, creativity, knowledge, and technical skills to the table that you can’t access through technology or money alone.
Social
Social capital is one of the most critical and valuable varieties of capital. Social capital refers to your networking abilities and relationships with customers, vendors, and the general public. So forming and nurturing business relationships is one form of social capital.
Another is your business reputation, whether you’re known for high-end products or superb customer service.
Losing social capital is super easy, unfortunately, so you must maintain customer, vendor, and public relationships. Social capital is all about having influence and trust between other business connections and people. Personable and professional employees are an excellent way to increase social capital.
Knowing the five essential types of business capital can help you foster sustainable development and run a flourishing business. You may not see the value in certain assets like employees or your hiring process, but you can use these to increase your company’s value and generate more profits.