CAPEX or capital expenses is what your investment in the business. Most of the CAPEX is at the initial stage, therefore. CAPEX is very important as these investments are towards setting up what will, in turn, give you the revenue. For example, it could be buying a coffee machine if you were starting a barista business.
It is important to first draw up a list of what you will need to start the business. This list should be comprehensive and should also include costs for legal, accounting, and insurance that might be necessary. Once this is done, it is important to establish where the money is going to come from and also whether spending this money will give me the desired return on investment (ROI). Some research might be necessary to see what can be viably expected and if there are other options where I would rather put this money.
In case you are looking at bank finance for CAPEX as is the case with most businesses that need substantial investment to buy another business out, take a franchisee or simply set up from the scratch, you would need a Business Plan to be drawn up along with financial projections. The banks need it before they approve a loan. Banks also look at the repayment capacity through their own analysis and security.
CAPEX could vary from industry to industry, or even business to business.
In case you are taking a loan, remember to factor in the interest payments. In Australia, interest payments are termed as deductions for tax purposes. The principal amount of the loan can be repaid from any excess cashflow that you have but not necessarily tax-deductible. Of course, having said this, there are some deductions that are allowed on such expenses as well, mainly being depreciation over certain permissible time limits. Owing to government relaxations, some items are directly deductible as well. Such direct deductions are known as Instant Asset Write-Offs (IAWO).