Small Business Fixed Capital

What is Small Business Fixed Capital?

In these pages on calculating your requirements for startup funding, you would have come across the phrase a number of times. On this page you will an explanation of what it means.

A Definition

The phrase Fixed Capital refers to the one off capital expenditure you need to make when you are starting your new business.

These purchases relate to assets that you need to run your business and could include the purchase of fixed assets such as land, buildings, furniture and fixtures, equipment or major plant.

By their very nature, all of the items you purchase with your fixed capital will be reported in the balance sheet.

How Much Fixed Capital will you Need?

Only you can determine that, as it will vary from one business to another depending on the type of business and your method of operation. The amount you need will also be affected by the financing and operational choices you make.

For example are you planning to lease or buy your business premises?

Do you need a delivery vehicle, and if you do, would it be better to buy one or lease it?

Are you planning to buy all new office equipment or will second-hand do the job?

How to Calculate Your Needs

The first thing you need to do is to make a list of all of the assets you will need to purchase to open your business. List all of your equipment requirements including office equipment, vehicles and other plant, and your beginning inventory.

Then you need values for each of them. If you are not sure about the costs contact several suppliers and ask for a quote. Once you have costs for all of the items on your list you can tally it up to estimate the total amount you will need for your fixed capital purchases.

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