Legal Definitions - capital investment

Capital investment

Capital investments refer to the money a business spends on acquiring assets or the money a financial institution loans to a business in exchange for repayment or a share of profits.

• A business purchases a new building to expand its operations.
• A venture capital group loans money to a startup in exchange for a percentage of ownership in the company.

The first example illustrates a capital investment where a business acquires a capital asset, in this case, a building. The second example illustrates a capital investment where a financial institution loans money to a business in exchange for a share of the profits. In this case, the startup receives the necessary funds to grow their business, while the venture capital group receives a return on their investment.