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I assume you are asking for its negative effects.

It is risky because you have to come up with a capital to invest. And if your business does well, you would be able to cover your capital, and whatever that is extra after all payments due is your profit. When you start a certain kind of business, you may have to pay wages to your workers, pay utility bills, for advertising, samples, catalogues, brochures (depending on what business it is). If, however, your business fails (lack of demand for product marketed, economic recession whereby people have little purchasing power, oversupply of product making them cheap everywhere - so you are to sell for cheap - you don't make a profit), you lose your money. If your capital was something you saved, you just lost that. If it was from a loan you took, now you have to pay for it for a certain duration, having gained nothing from it.

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13y ago

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