What is a Business Capital Investment?

A business capital investment is funding invested in a company by an individual investor or a group of investors. At times, the source of the funding is from a group of investors that have organized into what is known as a capital investment fund. The purpose of this type of investment is to either aid in the launch of a new business or provide funding for the launch of a new product or project by a company that is already established in the marketplace.

When it come to sources for business capital investment, angel investors are the most common type of investing activity. Investors of this type may be individuals or groups, and may focus their investment activity on particular types of business operations. For example, a given angel investor may be interested in helping entrepreneurs that are developing new equipment for use in the production of alternative forms of energy. When this is the case, new companies involved in the production of solar energy in some capacity would seek out those investors, present their case, and hopefully secure the investment of the capital needed to get the business up and running.

Institutions also sometimes engage in business capital investment. The process is very similar to the approach taken by angel investors. In this scenario, an institution will consider all relevant factors, including the potential of the business to capture attention in the marketplace and begin to generate income within a specified period of time. The potential returns are also considered, along with any risk factors associated with the venture. Assuming the company exhibits the potential to be successful, and the projected returns are acceptable, there is a good chance the institution will choose to invest in the venture.

The exact terms involved with a business capital investment will vary. Some call for delaying any type of payment to investors until a certain amount of time has passed, or until the business has achieved a certain level of consistent income generation. Compensation may be in the form of interest payments, the reception of shares of stock, or a combination of the two. Since the terms for a business capital investment can vary from one situation to the next, it is important for investors to not only consider the potential for success, but also the type of returns that can reasonably be anticipated and the form those returns will take.