Financial Capital

Financial capital is the second of three forms of entrepreneurial capital. Capital is resources and financial capital is financial resources: money or access to money.

Money can be cash as in a suitcase full of fifty $100 bills. It can be the balance of your checking account. It can be stocks or bonds or investments that can be liquidated. It can be a house that you have just sold or which you can mortgage to get cash. It can be a car that you can sell.

It has to be something that you can either pay for something else with or which you can use as collateral for money that you can use to pay for something with. It could be a rich uncle who says you can have $100,000 for whatever you want just tell him and give him a few days to sell some non-performing stocks.

Financial capital is not the most important resource, but you need money. You need to have it so that you don't have to begin your business by borrowing. If you are thinking of a business that you can only start if you incure a huge amount of debt before you can start, I would recommend you think up another business you can start on no or very little money.

Plastic financing used to be big for entrepreneurs because banks weren't going to lend them money and most of them weren't eligible for angel investors or venture capital. But it's harder to bankrupt out of debt and credit card interest rates are through the roof so that's not as attractive as it used to be.

Shakespeare said "Neither a borrower nor a lender be." There's a lot of wisdom in this. But if you do have to borrow money, make sure you can pay it back. I wanted to join an expensive business club here in Philadelphia. I needed $4,000 up front and it would have been difficult for me to get it. But I was getting a pension from Wisconsin and I set the payments so that monthly payment would at least make the repayments. And I had some IRAs that I knew I could use to repay if the worst happened. My father-in-law gave the money and I repaid the loan about 2 months early. He was quite impressed.

If you borrow it from a family member, make sure you write out a schedule of repayments and if there's interest to be paid, make sure it's reasonable. And make sure you make your payments on time or maybe even pay off the loan early. That way they'll be happy to lend to you in the future.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mysteries, The Case of the Kearney Music School Murders and No Stop on Red, both available at Amazon.com. You can read the first one for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.