(They could also be called “donations.”) Documenting each gift is important: you’ll need to document gifts in a letter to the IRS explaining that the money is a gift. Gifts are money that you receive, usually from this group of people, without any obligation to repay. GiftsĮvery entrepreneur is supported by a friends or family that want to help. You should map a path to generating a salary from your new endeavor, and ensure you have the resources it takes to last that long either before committing to using your personal savings or before leaving your job. Depleting your personal savings is also less of a risk than digging into your 401(k), retirement money, or other funds designated for your future.ĭon’t overlook the importance of your personal savings in supporting your own living expenses, particularly if you plan to leave your previous employment. There are typically no limits or restrictions on using this money since withdrawing this money is less likely to have tax implications or fees for early withdrawal. If you are able to use savings, they will be the cheapest source of funding. Using personal savings to get your business up and running is ideal, but often impossible. If you’re ready to make the leap with bootstrapping your business, there are four key areas that you can tap into to get started.
Second, bootstrapping is commonly praised because it requires quick learning and even quicker innovation – there’s no extra money to make egregious mistakes with. First, it leaves the owner (or owners) of the business entirely in control of the direction of the company, limiting the number of stakeholders like investors or bankers that would require oversight on major decisions. 82% of small businesses are self-funded, and there are a number of reasons for that. The term broadly refers to the idea that business founders “pull themselves up by their bootstraps”, or use their own, limited funding to get a business into motion. But let’s take a step back and dig into what exactly bootstrapping could mean for you: What is Bootstrapping?īootstrapping is one of three extremely common ways to fund your business, alongside debt and equity financing. Are you considering bootstrapping your small business? Around 77% of small business founders rely on their personal savings to get their businesses off the ground, so you certainly wouldn’t be alone if you decide to bootstrap.