The Point: We’re often asked at Tip of the Spear Ventures, “What are the best ways to go about business funding – Is Bootstrapping an option?” The short answer is “Yes.” Bootstrapping is just one way to accomplish business funding, but it also has the most heartache or ramen diet attached to it. So in this article we’ll explore business funding through bootstrapping… Enjoy!
Small business funding refers to the means by through which an aspiring or already existing business owner gets enough money to begin a new business, buy an already existing business or finance future business activity. A small business is usually defined as a business that earns less than $10 million per year and employs fewer than 100 employees. This definition does not necessarily mean that small businesses have a low income or are considered unprofitable. Small businesses can be very successful, and many small businesses are able to become profitable even with relatively small capital investments.
Bootstrapping, on the other hand, refers to using existing resources (cash) to launch a business. Bootstrappers typically start with personal savings or credit cards to obtain the funding they need to launch their business. These loans are typically secured loans, meaning that they require collateral in the form of personal assets or property owned by the borrowers.
There are many small business funding options available to small businesses in today’s economy. Most angel investors and venture capitalists prefer to invest in well-established businesses with proven track records and a good track record of success (revenue). The more risk involved, the less likely these investors are to provide business funding in raw form, such as business loans. However, even in the absence of venture capital and angel investors, there are numerous other sources of funding available to small businesses, including personal savings, business loans, credit cards, small business investment funds, lease option funds, business franchises and subcontractor companies.