Capital is all resources that serve to start or continue a business. It can be said that it is one of the fundamental elements of the company, because without it it is not possible to produce or further develop the company. That is why the capital strategy should focus primarily on the company’s financial strategy.
In the theory of economy one can distinguish two forms of capital occurrence: financial and real capital. All material items are defined as tangible capital, which are necessary for the company’s operations, such as production machines or a car. On the other hand, all intangible assets that create goodwill are recognized as financial capital, which include cash, credit or securities in various forms.
Increasingly, however, the third form of capital is mentioned, namely intellectual capital. Under this name, everything that was made of the knowledge of the company’s employees is hidden, such as patents, copyright and technological solutions. Intellectual capital is a relatively young concept, related to the development of a knowledge-based economy. Thanks to this form of capital the company is able to create a competitive advantage over other companies in the industry.
Due to different sources of financing, capital can be divided into: equity capital, foreign capital or hybrid capital. Equity capital is a financial or in-kind contribution by the owner, partners or shareholders to the company and the retained earnings generated by it during the period of operation. It can be divided into internal equity and external own capital. Internal capital comes from retained profits, that is part of the net profit of the company that falls to the owners of the company. On the other hand, the external own capital most often comes from the issue of the company’s shares and the increase of its shares. Equity also includes venture capital and private equity. Venture capital is a method of financing addressed to young companies that are just entering the market. On the other hand, private equity is a method of financing a mature company, existing on the market for several years, which are looking for additional development opportunities. In both cases, funds for business development come from active investors, that is, those who have the right to engage in company management due to the high risk of both financing methods.
Foreign capital is capital acquired only and exclusively outside the company. The sources of foreign capital acquisition include bank loans, financial leasing and proceeds from the issue of debt securities. Debt securities are securities containing monetary claims. Examples of such securities are checks, bonds, bills of exchange, commercial vouchers or warrants. Financial leasing, also often referred to as capital, is one of the most common sources of financing enterprises in Poland. It consists in transferring by the lessor (person or financing entity) for a fixed period the right to use the lessee’s fixed assets specified in the contract in exchange for fixed fees. The main advantage of foreign capital as the source of raising capital is maintaining the independence of the owner or the management board of the company as to the decisions made. The biggest disadvantage is the necessity of repayment with interest.
Hybrid capital is also called mixed capital. It combines both the characteristics of own and foreign capital. The most popular sources of hybrid capital include convertible bonds. It is a type of bond that gives the bond holder (bond holder) the right to convert them at any time into shares of the company issuing them. More and more often in the context of sources of mixed capital, mezzaine is said to be financed. It involves taking a long-term loan, where a certain amount of it will be repaid on a regular basis in cash, and the rest will be a warrant that will allow future coverage of shares or purchase them at a special price.