What is start-up capital?

• A. Start-up Capital is the money needed to start a new business
• B. The ongoing operating funds for daily expenses
• C. The profits earned in first year
• D. The assets used in production

Answer: (A)

Start-up capital is the money required to launch a new business. It covers the initial costs before you start earning revenue—things like purchasing equipment, signing a lease, obtaining licenses, marketing to attract customers, and covering initial payroll and other operating expenses until cash flow picks up. This is different from ongoing operating funds, which are the daily working capital used to run the business once it’s already up and running. It’s also not the profits earned in the first year, which come from operations after you start selling. And it’s not the assets used in production, which are physical resources like equipment or inventory, not the cash needed to get going.