Startups are successful only when you know how to manage the funds for your new idea. Starting path can trouble anyone, specially when you are stuck at a point while deciding the ways to initiate your startup plan.
It is quite difficult to lent money from financial institutions for startups. Investors are also not so interested in financing the one or two days old business.
So what are the ways left to lift your startup at this young period?
One of the most reliable and risk free method is to invest your own savings. You can also lent from your family members, friends or relatives. They are the one who will not care about your financial prospects or security.
What is Bootstrapping?
Bootstrapping is the method when an individual attempts to build a company out of personal finances or from operating revenues of new company.
It is the reliable and risk-free beginning for your new business. When a person invests his/her own funds, then it represents a cautious and serious way to begin. Investors likes to invest in those companies where personal funds of key person/s are involved.
What are the ways to Bootstrap?
Given below are some of the methods to bootstrap through managing the operating revenues of the company:
- TRADE CREDIT: Generally the suppliers do not allow the new company to give the whole buy on credit. So for a new business, it is difficult to deal with this situation, unless you have good communication skills. You need to insist the suppliers for financial plan of cash and credit. Meet the owner or financial officer of the supplying company and discuss your plan with them.
- FACTORING: This is the method where account receivable is sold to commercial finance company to raise capital. These companies are often refer to as Factors. The factors gets the hold of receivables. This process can be performed on the non-notification basis, i.e., debtors can remain unaware of such transfer of their accounts. This method reduces cost to company, in terms of maintenance of accounts. It also frees up money which usually ties to receivables.
- LEASING: Buying costly machineries at the start of business is not required, specially when there are other means to acquire it. One of such method is to take assets on Lease. Acquiring leased assets will replace the heavy cost of buying them. You can also claim tax exemption in the form of depreciation on fixed assets.