Get your business started with bootstrap financing
The one thing everyone needs before starting a business is money.
When you are thinking about raising money for your business, bootstrap financing--using your own money to get your business off the ground--may be an option you should consider, said Glenn Muske, Oklahoma State University Cooperative Extension interim associate dean, assistant director, family and consumer sciences.
"Bootstrap financing is a popular way of inside funding since it relies on your capability to make use of your company's resources to free additional capital to begin a venture, operational needs or expand your business," Muske said. "This is one of the most inexpensive and best routes for an entrepreneur to explore when raising capital. It is a way to manage finances better and pull yourself up without the assistance of others."
Entrepreneur.com lists a number of advantages to using bootstrap financing. They include:
--Since less is being borrowed you business will be worth more and therefore, no equity positions had to be surrendered.
--There will not be any high interest on borrowed money.
--With less debt on hand, you will appear more desirable to external lenders and investors when the time comes to use these routes.
--You can be more creative when looking for ways to raise profits, without looking to external sources.
Bootstrap financing can come in the form of trade credit, customer credit, real estate and from equipment suppliers.
Muske said the type of financing you choose depends on the business.
"Another thing to consider when beginning a business venture is whether to lease and not purchase," he said. "If you are able to shop around and get a good leasing arrangement it will help your business by making smaller payments, you retain the ability to walk away at the end of the lease term and often you may be able to negotiate built-in maintenance provided by the lessor."
Bootstrap financing starts and ends with a business's good financial management decisions.
Muske said it is important for business owners to be aware of purchasing decisions and if a purchase is not necessary for the business then really reconsider.
"Operating expenses are also important to keep a close eye on," he said. "It doesn't take too many unpaid bills to wipe out the profits a business has made."