Making a sound business investment is not only beneficial to the investor and the investee, but using money as a means for making even more money also stimulates and revitalizes the economy.
Debt capital and equity capital are the two most common types of business investments. Debt capital is basically a business loan - a set lending agreement between a business and a financial institution, where the business must pay back the borrowed money over a designated period of time with interest. The lender, or financial institution, doesn't own shares in the business, but loans are usually secured with company assets.
Equity capital, on the other hand, is financing raised in exchange for a share of ownership in the company. Equity financing allows businesses access to funds without accruing debt or having to pay back the money within a certain time frame. Two key types of equity investors are angel investors and venture capitalists. Angel investors are usually more willing to take larger risks, providing smaller sums of money over a shorter period of time at the beginning of a business venture, while venture capitalists pool larger sums over longer periods to fund businesses with established earnings and growth. Both however, seek some involvement in the company, whether its angel investors counseling CEOs or venture capitalists acquiring a board seat.