Capital expenditure (often shortened to capex) is money a company spends to acquire, upgrade, or extend the life of a long-term asset — such as machinery, vehicles, premises, IT infrastructure, or intangible assets like software licences. Rather than being charged directly to the profit and loss account in the year of purchase, capex is recorded on the balance sheet as a fixed (or intangible) asset, then depreciated or amortised over its useful economic life.
Capital expenditure versus operating expenditure
Operating expenditure (opex) covers the day-to-day costs of running the business — wages, rent, utilities, consumables, and similar items. These are expensed in full in the period they are incurred. The key distinction is time horizon: capex creates an asset with a benefit extending beyond one accounting period; opex delivers its value within the period.
- Buying a forklift truck = capex (depreciated over its useful life)
- Servicing that forklift truck = opex (expensed this year)
Why the distinction matters when borrowing
Finance for capex is typically structured differently from working-capital finance. A Credicorp Business Loan can fund a defined capital purchase, with repayment spread over a short fixed term aligned to the asset's value. Our Flex revolving credit facility suits ongoing operational spend where draw-and-repay flexibility is more useful than a single lump sum. Matching the finance structure to the type of expenditure generally produces better outcomes for cash flow.
We lend only to UK limited companies and LLPs, and the loan is to the company with no director personal guarantee. As business finance outside the consumer-credit regime, it is not covered by the Financial Ombudsman Service or FSCS.
See also: What are retained earnings on a company balance sheet?, What is a trade creditor in business accounting?.