Sources of Business Funding: BootstrappingHow to bootstrap your business

Bootstrapping means starting or growing your business with the resources you already have, without the use of outside funds.

Here is a helpful article from Intuit QuickBooks on how to bootstrap a small business.

Methods of bootstrapping your business include:

-Personal Savings/Debt

Many entrepreneurs budget carefully to build up their personal savings to use for their business, or utilize personal debt and credit cards to cover the first few years of operations. Be careful using personal debt to fund your business, since your credit score is a major consideration if you decide to pursue outside funding later on.

 -Gifts/Loan from Family or Friends

Bootstrapping doesn’t always mean self-funding. Many times, family and friends will offer gifts, donations, and even their own time toward the financial growth of your business. We’d recommend a written contract, no matter how close you are to your friendly investors, to make sure everyone’s expectations are clear from the start.

-Pre-selling Products & Services

If you have proven audience demand, you may be able to take pre-orders for your product or service to supplement the money you need to deliver on those orders. Just make sure you have calculated the true costs to deliver on these promises, or you’ll be out of business before you ever begin.

Pros of bootstrapping

  1. You maintain full control of your business
  2. There’s no requirement to make payments
  3. You can test market how successful your business idea can be before taking on other outside financing

Cons of bootstrapping

  1. Your available financial resources are probably limited
  2. There’s no guarantee that personal, or family/friend’s, investment will be returned
  3. The growth of your business may be limited and unable to meet true market demand and full potential of the business.

Typically in bootstrapping, a business can only spend what it makes. To help the business progress, it will require the owner’s sweat equity.

Want to use bootstrapping to start your business?

Find a local resource to help you build a strong foundation. Time spent in classes or with a mentor will likely be the best investment you can make.

We offer education for small business owners at Pathway WBC. You can also visit your local SCORE chapter or Small Business Development Center  for great resources.

Click here to return to the “4 Sources of Business Funding” article.