The capital requirement is the sum of funds that your company needs to achieve its goals. Plainly speaking: How much money do you need until your business is up and running? You can calculate the capital requirementsby adding founding expenses, investments and start-up costs together. By subtracting your equity capital from the capital requirements, you calculate how much external capital you are going to need.
Capital requirements planning is closely linked with all other parts of your business plan, because its follow-up costs have to be considered in the planning.
The capital requirements should be calculated as accurately as possible. If you plan too conservatively, you may not be able to compensate for unforeseen financial problems.Subsequent fundingis often difficult; some public investors even exclude it in their contracts. If you are calculating too generously, you will have more overall flexibility. It is however more expensive (if you fund your capital requirements with loans). In case of doubt:liquiditybefore profitability. In other words, it is better to apply for too much credit and return it, then to subsequently finance funds.
The dancing partner of capital requirement is the right financial plan and with it the right funding mix. The keyword is maturities. Read our glossary on funding and seek counsel from your financial partner.
