Capex vs opex

Definition

Capital expenditure (capex) is spending on assets that deliver value over several years — machinery, vehicles, fit-outs, equipment. Operating expenditure (opex) is the recurring cost of running the business day to day — rent, wages, stock, utilities, subscriptions. The distinction is not about size but about lifespan: a one-off purchase that lasts years is capex; an ongoing cost consumed quickly is opex.

Why the split matters

The two are treated differently in the accounts. Opex is charged in full against profit in the period it occurs; capex is capitalised on the balance sheet and written down over the asset's life through depreciation. That difference flows into which finance fits each. A capital purchase — a van, a machine — often pairs naturally with asset finance or a term loan matched to the asset's working life, so the cost is spread over the years it earns. Operating costs and the timing gaps within them are better suited to flexible working capital finance you draw and repay as cash moves. Matching the finance to the nature of the spend is one of the cleanest decisions in funding a business.