Businesses often need to raise money to help operate the business. This is called financing the business. Money needed to start up a new business is called startup financing or startup capital.
There are two basic ways to raise money: by borrowing money or selling shares in the business. These are called debt financing and equity financing respectively.
How Much Financing Do You Need?
When starting a business, you need financing until your business becomes cash-flow positive. That is, for each year when your cash coming in from the business is less than the cash going out, you need to finance that amount by borrowing or by raising capital from equity investors.
How Do You Pay People When You Have No Cash?
Many start-up companies have little or no money to pay employees' salaries. They can borrow the money and pay salaries in cash, but it's more common for early-stage ventures to pay with stock or stock options.