Bootstrapping Case

Bootstrapping

This term refers to a company owner who decides to solely fund their business on their own without depending on outside sources for financial support. In this type of funding, the entrepreneur often evaluates all of his/her assets, including personal savings accounts, credit cards, equity in real estate, retirement accounts, vehicles, recreational equipment, and even collectables. By assessing their personal assets, a business owner can easily generate cash if they decide to sell their property. They can also use these possessions as collateral for a future loan. The more money that an entrepreneur uses on their own for their business, the more likely they will acquire capital from other sources when they need it in the future.

Friends, family, business associates

When self-financing is not enough to provide the needed capital for a startup, business owners usually turn to their families, relatives, friends, and business partners for further financial support. These people tend to provide much needed support to the entrepreneur and enjoy the excitement and success of the new venture.

Government funding

While the Small Business Administration (SBA) does not lend money to businesses, they act as a guarantor through a network of local lending partners to help promote the startup, growth, and success of small businesses in the United States.

1. The 7 (a) loan program allows the borrower to apply for a loan from a lending institution of their choice. This loan is based on their current business status, credit history, and collateral.

2. Microloans are a type of small business loan that cannot exceed $35,000. The microloan is available through local non-profit intermediaries.

Commercial bank lending

Unlike SBA loans, commercial bank loans are not guaranteed by the U.S. government. Obtaining a bank loan may be difficult since banks use different many criteria when lending money, including the amount and purpose of the loan, company data (management and operations), the primary and secondary sources of repayment, financial statistics (balance sheets, cash-flow statements), credit history, etc. First-time entrepreneurs may face several rejections from different banks before being approved. There are three different types of financing options available to entrepreneurs so that they can fund their startups.

1. Term loans (aka conventional loans) are loans that are typically used to purchase equipment, buy a new building, acquire another company, or otherwise expand operations as the business grows. Business owners have the option to choose between fixed-rate or adjustable rate loans that have terms of up to 10 years based on amortizations of up to 20 years. Depending on an individual's personal qualifications, they can