At one point or another, most business owners have to think about how they will finance their operations. Whether you borrow money, draw from your own savings or choose another option, it’s important to choose the one that makes the most sense for you.
But how are other entrepreneurs faring on the various paths to business financing? Here’s what is happening in three of the biggest areas of funding right now.
Funding your business out of your own pocket — commonly known as bootstrapping — is the simplest, but potentially most difficult, financing route. On the one hand, you are in total control of your finances: You don’t have to make any payments to lenders or share equity with investors. On the other hand, you’re on the hook for every penny you sink into the company, and if it fails, your personal funds are going down with it.
“We see entrepreneurs end up in a position where growth and revenue is strong, but because of long payment cycles, they are short on cash to meet payroll, purchase supplies or acquire inventory. Understanding your options, whether it be a bank line of credit, invoice financing, purchase order financing, or something else, can be the difference between expansion, stagnation or layoffs for a small business.”