What Is the Capital Market?

 Photo Courtesy: [Laurence Dutton/Getty Images]

The capital market revolves around capital. Capital is more or less another word for money — usually money that businesses need to produce the goods or services they sell. When a business needs to raise capital, it uses common capital markets like the stock or bond market to borrow the necessary funds from investors and lenders.

Lenders and investors get something in return, such as stock in the company or the ability to earn interest on the loans they extend to the company. In essence, capital markets are where borrowers and lenders meet to exchange securities. Learn more about how capital markets work to better understand this important element of the economy and our finance industry as a whole.