1. Concept 1

2. LEQ 1 What methods can be used to obtain capital for a business?

3. Definitions: Capital is a business’s assets minus its liabilities. Capital is another word for money.

4. Assessment Prompt What is Capital?

5. Methods to Obtain Capital Equity Capital One way to obtain money for a business is the owners’ personal contributions into the business. This is called Equity Capital or Owner Capital. This money could come from the owners savings, inheritance, or from changing the ownership of your business from a proprietorship to a partnership or corporation. This could also be the money from the selling of stock if your business is a corporation.

6. Methods to Obtain Capital Retained Earnings Another way to obtain money is through Retained Earnings. Retained Earnings are the profits (money earned) through the operations of the business that owners reinvest. Examples could be placing the money earned from sales in a savings account or just leaving the money in the business account until needed. This can be called “plowing back” earnings. Earnings could be plowed back for the following reasons: Buy inventory, replace equipment, add new facilities, financials protection during slow periods.

7. Methods to Obtain Capital Debt Capital/Creditor Capital The last way we will discuss to get money for your business is through debt capital. Debt Capital is money that is borrowed from others and must be paid back with interest.

8. Methods to Obtain Capital There are two kinds of Debt Capital 1. Short Term Capital Must be repaid with interest within a year, and often in 30, 60, or 90 days. Can be obtained from a bank or other lending institution. Examples – loan, open line of credit, promissory note 2. Long Term Capital Money borrowed for longer than a year. Examples – Long term note, lease, bond

9. Assessment Prompt What is the difference between short term capital and long term capital?

10. Methods to Obtain Capital LEQ 1: What methods can be used to obtain capital for a business? ****write this answer on your student learning map