Ramon Ecung's Personal Blog

So you’ve thought of a great idea for a product or service and are ready to start actually implementing your strategy, but you soon realize you need funding to fully realize your goals. This is a point every business owner finds themselves in at one point or another. When someone is looking to fund there business, they have a few different options: self financing and bootstrapping the operation through persona financing and credit cards, finding sources of income that are close to the owner such as family and friends, or seeking outside investors .

Self financing your business is probably one of the more common routes business owners go through. This could involve working a normal job and coming home to run your business with your personal resources. These resources include the salary from your job, savings, a mortgage on a house, and even credit cards. This is the easiest way to start a business that doesn’t require a substantial initial outlaying of capital.

Another way to fund a venture is to have friends and/or family act as investors in the business. This allows you to have better “credit” with the individuals you’re borrowing from because the amount they lend will be more based on personal factors and belief in you as a person, rather than financial metrics and credit scores. This can be a good way to fund a business, but be careful when doing business with friends and family: both of you have a vested interest in the outcome of your business (aka you both have “skin in the game”) and it may cause tension.

Theres a few different ways to accept money from outside investors: you can issue stock in the company which gives others an ownership stake (equity), you can issue bonds which act like loans from individual investors (debt), or you can take out an actual loan (bank financing, also debt). Each has it’s good and bad points, and should be carefully considered before getting legally bound to other legal entities.

Personally, I would start a business by bootstrapping to get it off the ground. If my cash flow situation was insufficient for me to grow my business at any point, I would assess my needs and depending on how much cash I needed, I would choose a bank loan if the cash I needed was more than I expected I could get from family and friends.

Links of Interest:

http://www.allstargroup.com/Forms/CHURCH%20BOND%20vs.pdf

http://finance.yahoo.com/how-to-guide/career-work/12825