The paper represents the challenges of Georgia’s capital market, its importance for economic development and diversification of the financial sector. Capital markets have an increasing role and weight in Georgia’s economy. The formation of the capital market is a long process as it requires the formation of the financial instruments, market infrastructure and institutions. Considering the capacity of economy and its potential benefits, Georgia has less developed economy and therefore, the capital market is underdeveloped. The paper analyzes the prerequisites for forming and developing the capital market in Georgia, as well as its characteristics. In this paper we investigate the several sources for financing gross financial needs and for making optimal decision, which type of instrument should the government of Georgia use before raising funds, we compare the financial conditions of the existing sources with each other.