Capital goods or the manufacturing industry is a vital part of the economic growth of any country. There are huge numbers of factors that impact the GDP as well as impacting the purchasing power parity (PPP). As per the World Bank statistics, nearly 5 billion people worldwide have no access to basic needs like shelter, food, clean water, and safe health care. According to a report by United Nations Educational Scientific and Cultural Organization (UNESCO), almost 10 million children suffer from poor sanitation conditions in low- and middle-income countries, while almost 1.9 million girls drop out of school each year due to lack of toilets.
In addition, 4.6 million women die each year due to complications related to pregnancy and childbirth. For all these reasons the gross international product (GDP) has been forecasted to grow at a rate of about 19 percent in 2020. Based on such trends and the fact that the global demand for manufacturing products is expected to rise by 18% by 2040, it is very important for businesses to start their own capital goods business. Let’s get started.
What Is A Capital Goods Business?
Capital goods business can be defined as a type of “business which involves acquiring, developing and using a wide range of assets, equipment, machinery, facilities, people, and supplies to produce goods and services which meet consumer needs. This is usually done with the help of a financial partner who acquires the resources necessary to do so.” There are various types of assets that are required when doing a capital goods business. Some examples of them are:
- Raw Materials
- Machinery
- Office Furniture etc.
Generally, a company that wants to start its own capital goods business first requires either cash or credit to get going. If a small business wants to start this, then the most common type of capital goods that they would need is debt. This type of capital goods is known as secured borrowing from a bank, where a lender borrows funds from another lending institution, and this money is used to buy assets that can be sold later.
Another type is equity funding. Here, an investment group buys shares from another entity, and the share price grows based on profit generation. Lastly, there is also government funding, where the government helps companies to fund. These types of capital goods are generally considered debt-free because they cannot be taken away easily by the borrower. When starting your own capital goods business, you may want to look into different types of loans available from various institutions to see how one best fits you.
How Do You Get Started With Capital Goods?
The process of getting started with a capital goods business can be similar to what a startup looks up for.
- First, you will need to identify a market.
- Find a person who wants to sell their inventory for you and ask him/her for a loan.
- Next, create a plan.
- After that, you should find the right asset types to use.
- Then, choose the best type of financing for you, as the type of financing that you choose will depend upon the amount of your business, credit scores, and other requirements.
- Finally, you and him/her will work together to start selling your inventories and become your new client.
- Once your new client starts buying, the next step is to keep selling the inventory.
- Once you reach customers, the third step is to make sure they pay you.
- After completing this process successfully, go down the road of making more money.