From the moment you have an idea up until the point where your company starts building some traction (finding new customers, getting a product launched); Bootstrap Capital is what's going to pay the bills.
Bootstrap Capital is what's going to pay the bills.
Therefore it's important to understand (and exhaust) every possible form of Bootstrap Capital. Here's a quick overview of each source. We'll go into much more detail about how to leverage each one individually a little later.
Every startup is intimately familiar with Sweat Equity. It's the exchange of your time or resources for stock in a company. It's probably the most common form of currency a new startup company has, and it's incredibly valuable.
Every startup is intimately familiar with Sweat Equity. It's the exchange of your time or resources for stock in a company.
When you and your co-founder are putting in 18 hours a day to get your company started in exchange for 50% of the stock, you're earning Sweat Equity. When your Web designer builds your company's site in exchange for 2% of your stock, you're giving up Sweat Equity.
Friends and Family
You may have never guessed that one day your Uncle Ned would be an investor in your company, but there it is. You're now hitting him up for $10,000 in investment cash to get your company off the ground. He's now a partner in your new gig. He's on your team, not just in your family.
Friends and Family are a very important source of early stage capital because frankly they're the only people that will write you a check just because they like you. Entrepreneurs who learn how to use their extended networks of business contacts and relationships can find substantial amounts of capital if they really dig.
Savings and Credit Cards
No one likes getting into their personal savings but let's face it - you're the only person who's truly willing to underwrite this business today. We don't have specific numbers but our best guess is that just about every entrepreneur has had to go through the painful exercise of draining their bank accounts and maxing out their credit cards to get their businesses started.
Even the suggestion that you'd prefer not to touch your savings or put yourself into personal debt is ridiculous. It's going to happen, and honestly, it's sort of going to suck. But it's the price we all pay for building our dream company.
Beyond personal credit cards, there are quite a few different types of credit lines accessible to new businesses without much traction. This could be a store card from Staples or something more personal like a Home Equity Loan.
Even if you decide not to use your available credit lines, you should absolutely explore every option and understand what is available. You may find that the $50,000 you need to remodel a house you want to flip can be covered by Lowes, not your local bank.
If you’re interested in business credit, you can call us at 1-888-391-7096 to learn how you can build your business credit and get the funding you need by following a simple, proven path.
The latest craze in early funding is called Crowdfunding, and it involves posting your investment opportunity online and having scores of individual investors pool money to fund your idea.
Crowdfunding tends to work for relatively small projects that need less than $10,000 and does not work at all if you're going to exchange stock for cash (that's called a "public offer", and there's an entire government agency, the SEC, that would prefer you don't do that.) Crowdfunding therefore limits your options to raising small amounts of money as repayable debt or in the form of a donation.
We would be terrible entrepreneurs if we didn't at least mention our own site, Affordit.com, which was specifically designed for entrepreneurs looking to help smooth out the big costs of setting up an office - like purchasing desks, chairs and laptops.
Affordit grants new and small businesses a small line of credit that they can use to buy common office equipment and pay for it over a short period of time - usually less than six months. It's not the same as a big new lump of cash but it's specifically intended for entrepreneurs like you and could help some of your cash flow issues as you get started. (OK, end of plug.)
Bootstrapping is the way of life for entrepreneurs. For every great company (even the funded ones) there is a great story about how the Founder leveraged some form of Bootstrap Capital to get the company out of the gates.
There's a good chance that your company will never attract (or need) outside funding, so if nothing else, Bootstrapping should be your primary concerned when it comes to funding your new venture.
Remember the best outcome is not needing more capital to begin with. Wouldn't that be nice?