Final answer:
Nonprofit businesses can raise capital, but not through traditional equity financing like issuing stock, since they don't have owners or shareholders. They mainly rely on donations, grants, and sometimes debt instruments to fund their operations.
Step-by-step explanation:
The statement 'Nonprofit businesses cannot raise equity capital' is False. While nonprofits do operate differently from for-profit businesses, they have various methods for raising capital. Nonprofits can't issue stock in the traditional sense because they do not have owners who can claim a portion of the profits. However, they can receive funding through grants, donations, and sometimes debt financing like bonds. Revenue for nonprofits is typically reinvested into the organization to further its mission rather than being distributed to shareholders as dividends.
Furthermore, early-stage firms that are not yet profitable face challenges in raising financial capital. This is crucial for nonprofits, which may not have a conventional profit motive but still need capital for growth and operations. Venture capitalists and private investors sometimes provide capital to for-profit businesses in exchange for an equity stake and they can closely monitor the firm's operations. Nonprofits, however, rely on the support of donors and funders who believe in their mission and do not expect a financial return.