QOur two-year-old company has young owners who have no assets to collateralize. What are the best ways and practices to get working capital for a business without giving up equity?
ANDREW KITZENBERG, Founder/president of Memory on Hand, [email protected]
AThe challenge of financing a start-up is huge. Early stage equity is expensive and avoiding it is wise. But how do you fund the business? The answer is bootstrapping.
Bootstrapping falls into two categories: minimize cash expenditures and generate early cash flow. Minimizing cash expenditures includes working from your home, buying used equipment, borrowing equipment, etc. This aspect of bootstrapping is a mind-set. You must constantly look for ways to avoid spending money while still building the business.
The second aspect — generating early cash flow — addresses the question. Personal savings, including 401(k)s and other retirement savings, are the place to start.