Sophia plans to start a small florist business very soon. To make a beginningshe borrows money from her friends and family to invest in her business . Which type capital has Sophia arranged?

A. Seed capital
B. Working capital
C. Growth capital
D. Expansion capital

A. Seed Capital

Explanation:

Seed capital is the initial funding that is required when an entrepreneur wants to take on a new business venture. This is crucial for any business to develop and grow. When taken literally, assume that you want to grow a plant. In order to do this, you would require the seed of that plant, without which, no rich soil, sun or water will help.

The seed capital satisfies the same purpose with a business. If this is unavailable, the business cannot be set up and run. This is the money that is necessary to begin preliminary activities such as research and development, market research and business plan development. Seed capital contains a lot of risk for the investor since it involves investing in a business that has not yet functioned and has no profits or sales records. Generally, investors who provide seed capital do so for a stake in the business such as family and friends rather than a bank or loan institution.

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