Why Successful Entrepreneurs Invest In Their Businesses

“In investing, what is comfortable is rarely profitable.” – Robert Arnott

Nobody believes that starting your own business – and maintaining it – is easy. It brings plenty of risks. You must give time, money, and effort, all of which are huge investments.  You may have planned a variety of ways to spend your earnings. What if you reinvest what you have earned?

Nobody believes that starting your own business – and maintaining it – is easy. It brings plenty of risks. You must give time, money, and effort, all of which are huge investments.  You may have planned a variety of ways to spend your earnings. What if you reinvest what you have earned?

Investing your own money to drive your growth is a high-risk, high reward scenario. Yet, if you want to scale your business, taking that risk is imperative. 

Why invest in your business?

  1. To scale your business

If done properly, there is no doubt your investment can help scale your business. Additional funds can help you improve your marketing, hire the most qualified people, invest in CRM to improve your relationships with your clients, invest in research, and much more. All these are aimed at improving the quality of your business and helping you do more to attract new customers. 

  1. It will make you more focused 

Many call it “having skin in the game”.  We tend to take things more seriously when we put our money on the line.  And when you as a founder take your business more seriously, it will rub off on everyone else around you.

  1. Lets you concentrate on your expertise

With no one to answer to but yourself, you can focus on what you do best and leave the rest to your people. Being a jack-of-all-trades can only get you so far. If you are good at strategy but not in sales, then hire a salesperson. Knowing and acknowledging what your weaknesses are is always considered a strength.

  1. Improves employee productivity and engagement

Employees become more productive and truly engaged when their employers invest in their development and provide them with tools to help them become more efficient. When they see you are willing to spend for them and the future of the company, they start to feel that they are part of the family.

  1. Better product quality

Your product will always be one of the main factors that will drive your business’ success. You should consistently be investing in research and development to improve your current products or introduce new ones. Large companies spend a lot on research and development, which is why they are so successful.  Even things as simple as customer surveys and competitor research which are relatively inexpensive can keep you innovating. 

  1. Attract top talent

You have the money, so you can now afford to hire the best talent available, or even those who are not available. With the culture, you have built and the money to spend, even professionals from other companies w00000ill stand up and take notice.  Do an in-depth analysis of what talents your team is missing and go out and find the missing link. 

Where to begin?  

1. How much can you invest?

When your business earns a reasonable amount, it can be quite tempting to start paying yourself. However, you might want to resist the temptation and start reinvesting that money back into your business. 

Start by checking your operating expenses. If your (Operational Expenditures), OPEX fund is just enough for your monthly expenses, then you cannot set aside money from that fund to invest in your business. You will have to look elsewhere, which could be from your salary or profits.

2. Know your annual forecast & cash flow 

If you have an annual forecast, you already have a tool that will give you the information you need to make sound decisions regarding your business.  An annual forecast will also assist you in balancing your expenses throughout the year and understand your cash flow to know what you have leftover to invest.

3. Understand your finances

While your company is a separate entity, your company exists to generate income for you. If this business is your only source of income, you will have to be more aware of your personal finances. If you have other income, then you can be more flexible. 

How to invest your company’s profits

Listed below are some of the best ways to reinvest your business’ earnings.

  1. Marketing

Marketing will help you grow. With the advent of digital marketing, reaching out to potential customers has never been easier. Marketing has become more focused as far as reaching the right people is concerned. An investment in marketing can help you grow and expand your operations quickly.

  1. Business improvements

Some entrepreneurs reinvest in improving their businesses. They spend on infrastructure, inventory, and equipment.  Think about what is holding you back and steals your time… a small investment in a solution could advance your growth exponentially 

  1. Outsource

There are things that some people outside the company can do better. Consider outsourcing some of these tasks to free you and your team up so you can focus on things you want to do more. 

  1. Consider hiring a consultant

You might want to consider hiring a consultant. A consultant or coach can give you the proper guidance on how to create an effective business strategy, presenting to investors, guidance on executive leadership, and so on.

  1. Find ways to improve yourself

You can enroll in classes where you can improve your skills. Perhaps courses in management or sales can prove to be valuable to you or other key members of your team.


It is every entrepreneur’s dream to scale their business. If you are a business owner, you might be too busy to think about investing in your business right now and that is okay. Just make sure you have put your future investment plans in place to increase your chances for growth. 

Remember, what’s comfortable is often not most profitable.


Need capital for your business… Loans or an equity investment?

Your business needs capital, and quick!  The reason doesn’t matter; perhaps you are a startup or a more mature business with an opportunity to invest in a new project to help you grow.  You may even have had negative impacts caused by today’s unsteady economy and your capital structure is sub-optimal and you just need to buy some time to weather the storm.  

So, now you have a new problem. Where will you go for financing? 

This is one of the most difficult questions a business needs to answer.

Entrepreneurs like you who are looking to raise capital have two main ways to do so: you can apply for a business loan or secure equity investment financing. We have put together a summary of each option to help you on your fundraising journey. 

Business loans

You can apply for business loans from financial institutions like banks, credit unions, credit card companies, finance companies, and private businesses. When you take out a loan, you agree to pay back the capital you received, plus the interest. 

With a business loan, you still maintain control over your company. You do not have any investors to answer to. It is also much faster to acquire than seeking investors, so this is a good option for you if you are in a hurry to raise funds.  

Another thing getting a business loan can give you is the opportunity to build your creditworthiness. It means you become more attractive to financial institutions and can get more favorable loans when you need them again in the future. 

Advantages of business loans

  • The financial institution does not get any portion of the profits in your company.
  • You have the freedom to use the money from the loan in whatever way you choose.
  • You can deduct the interest payments as a business expense.
  • Your payments are in regular monthly periods at a fixed rate.

Disadvantages of business loans

  • You will have to pay the principal, plus fees and interest. 
  • If you do not have the ideal credit rating, you might not qualify. 
  • Most lenders ask for collateral, usually, it is your personal property.
  • If unfortunately, your business fails, you will still have to pay the bank.

How to increase your chances of getting a business loan

If you decide that getting a business loan is better for you, there are a few things you can do to increase your chances of success. 

  1. Have a solid business plan.

Creating a sound business plan gives you a better shot at getting that much-coveted business loan. Be well-prepared for the presentation and polish your executive summary. The summary is normally the first thing lenders look at, and if they like it, they might take the time to read the rest of the plan.

  1. Put some of your money into the business.

Banks also like it when they see the founders invest some of their money in the business because it shows how confident you are in your own business. 

  1. Instead of buying property, just rent.

Lenders would rather see you rent than buy a property. They want to see the money go to assets that create income, like equipment and inventory. Lenders also do not like seeing high renovation costs.

  1. Review your credit report.

Review your credit report before starting your application for a bank loan. Lenders will check your credit history to help them decide whether they will let you borrow their money or not. Check if there are any mistakes in the report, as they might prove costly to you. If your report shows you had late payments before, you can write a letter to explain what happened and that circumstances have now changed. 

  1. You may also try smaller banks.

You might have a better chance at success with smaller banks than larger ones. There is no harm in applying.

Equity investment

With equity investments, you surrender a portion of your company in exchange for funds. An investor or group of investors invests money in your company and becomes a shareholder or equity partner.

While in a business loan you still retain all your rights to the company, the opposite is true when investors buy shares in your company. 

Here are a few of the most common types of equity investment:

  • Venture capital: This is an investment by a single venture capitalist or group, buying a portion in start-ups and mature companies.
  • Ownership stake: This is a direct investment by the owner or a new person wanting to come in as a co-owner.  
  • Public investment: This is an investment by the public into the shares of publicly-traded companies.

Advantages of equity investment

  • You can get a larger amount of money from investors compared to bank loans since banks are very cautious of lending large sums of money due to risks of default. 
  • There are flexible repayment terms.
  • There is the possibility that at least one of the investors would be willing to mentor you to help you run the business. This normally happens between an investor and an investee since investors also have a stake in the business.
  • Depending on the agreement terms, there may not be an obligation to pay back the investors in case the business does not succeed.

Disadvantages of equity investment

  • Since investors may want to oversee the operations, you can lose some control over your own business.
  • Equity investors will get a big slice of the profit pie.  The total amount of money paid out, in the end, may far exceed that of the interest and fees on a simple business loan.
  • Investors may get legal rights over the company and in some cases,  can sue if you commit any violations.

How to increase your chances of getting investors

Here are a few tips you can use to get investors to give you some of their cash.

  1. Present numbers

A presentation with words and no data is merely an opinion. Fill your presentation with realistic data.

  1. When using words, focus on verbs and ditch the adjectives

Tell potential investors what you are going to do to ensure that the company prospers. They are not interested in generalizations or technical jargon.

  1. Always tell them what’s in it for them

Potential investors do not care what your dreams are, what you love to do, etc. Your goal is to let them know what they can get for their money. 

  1. Answer their questions at once

A common practice among presenters is that they reserve the question-and-answer portion to the end of the presentation. But when investors ask a question in the middle of your presentation, you have to answer at once, lest you lose your chance of clearing any of their doubts.

  1. Expect to answer tough questions

The top investors ask tough questions to test how you respond to pressure. It is better for them to see you fail during this stage rather than during the business operations itself. 


If you are in the money hunt for cash, eventually, you will have to decide whether to get a business loan or to look for investors to secure equity investment. Your decision will depend on your business objectives. If you can see that your business has potential for incredible growth, then equity investment might be better for you due to lower risks, more lenient repayment terms, and the mentorship you could receive by involving the right investors. 

Conversely, if the amount of funding is small and you do not plan on building a massive company, a loan may fit the bill, so that you can maintain complete control of your business.

There are pros and cons to each capital raising method.  Hopefully, we were able to assist you in making an informed decision.


Fundraising Trends 2020: Facing a New World

It seems like everyone’s main goal right now is to sit it out this year; stay alive, and hope for the best. For most businesses, it is to stay alive and strengthen their balance sheets. To be able to achieve that, many companies are raising funds. 

Aside from bolstering their financial position, firms are raising capital in anticipation to take advantage of future opportunities that arise after the pandemic. Entrepreneurs are having to be creative when it comes to fundraising during this crisis. Let’s look at the trends in raising funds and some of the challenges businesses face right now.

Be more creative to raise funds

We may be looking at an economic recession for the next one to two years. Many investors are slowing down and taking their time to invest. Those who had money in the secondary markets blew a lot of money after the stock market fell sharply in March, just as coronavirus cases were starting to build up. And even though the market rebounded, investors are careful about getting involved in new deals.

These investors are presently seeking additional data points in the private capital market, in an attempt to determine what is going to take place in the future.  Many are in a wait-and-see mode.  These times present rough conditions for entrepreneurs who want are looking for investors for their companies. Valuations are being hit and terms will be harder. Investors are naturally seeking more precautionary measures. Businesses will have to be more creative to get their much-needed funds.

Reasons to remain positive

The good news is that investors have $189 billion in cash reserves. This is an enormous amount of cash they are sitting on and could tell us that even though they are taking a more careful approach, investors still have the funds for the right opportunities. Though they do not have to put all this cash to work at once, they do need to distribute them within a given period or face the opportunity cost of inflation. 

The stock market has been unstable recently, making investors wary. Startups, on the other hand, have recently seen a 25% discount in valuation, which is very enticing to investors.

In essence, most investors are still in business and are still looking to invest. However, there has been a big drop in the early-stage company investing. Investment opportunities that are based in the U.S. will be prioritized over non-U.S. based companies, as global markets feel even riskier at this stage. 

A look at rights offerings

A rights offering is defined as a group of rights offered to current investors to buy more stock shares. An individual investor’s right to buy depends on their current holdings. This offer is good for a specific time frame, usually within a month and at a given price. It is an invitation to buy more shares so that the business can raise more funds. Investors may or may not accept the offer.

Bankers advise companies to raise capital this way since the outlook for the demand-supply equation in equities is not looking as strong for the rest of the year.

Alternatives to VC

If you are trying to raise funds, there are many other options. It is a big plus if you already have been funded before and have collected contacts over the years. Since most meetings are on Zoom right now, it would be difficult for investors to get to know the people they have just met. 

Other options include:

  • Individual Angels
  • Angel groups
  • Grants
  • Strategic investors
  • The government
  • Family

Navigation tips through this difficult environment

It is going to be a long and arduous road ahead, but that does not mean we should take 2020 as a lost year. Just be creative with your strategy.

  1. Focus on what you can control.

You cannot change the external factors that affect your business, but you can still focus on what you can control. It is time to tighten your belt to cut costs on things like travel and adjust manpower.

  2. Create value in your product.

For the same price, you can give your customers something more, even if it means you may have to cut some of your profits. The idea here is to gain their loyalty during the hard times and that you are telling them that you are here for them. Hopefully, when things get better they will remember and reward you with their checkbook.

  3. Build relationships with investors

Investors will tell you that they do not invest in people they have just met. They want to know you better, wait, and see if your company will grow and how you are running it. Once they are comfortable enough, then they give you the money. That is why you must start building your relationships early.  Many investors are willing to double down on a good thing, so if you have investors you have worked with in the past, this is always the most reliable place to start. 

  4. Keep In Touch

Your communications should not stop after your first meeting. Send them monthly updates by email. Include a summary of what you do, your recent accomplishments, and even a picture of your team. You can also include a Key Performance Indicator table.

Key takeaways

Our current condition requires us to work harder. Companies including Slack, GitHub, and Square were created during a down market and collected their fortunes in the upmarket.  There is a great quotation by Walt Disney, “You may not realize it when it happens, but a kick in the teeth may be the best thing in the world for you.”  Remember that down markets bring with them a chance for reinvention and often opportunities.


Crowdfunding for my Business; what is the Downside?

Over the last several years, crowdfunding has become a popular way of raising funds for many businesses, especially among startups who otherwise would not qualify for a loan from a financial institution. It is a method that takes advantage of the influence of social networks. 

In the past, founders requested contributions from their family members, friends, and colleagues. Now they can set up an online crowdfunding site to tell their story, upload photos, and accept contributions from different investors.

There are both upsides and downsides to this approach. Today, we will find out more about crowdfunding, and if this is the right move for you if you want to raise capital for your business.


Crowdfunding by definition is simply is using funds pooled together from a group of investors to finance a business venture. It makes use of social media to access a wide network of individuals, which also helps founders connect with investors. The goal of crowdfunding is to increase entrepreneurship and also investment opportunities by giving both camps a platform that is separate from the traditional way of investing. It is interesting to note that even non-profit organizations look to crowdfunding to raise funds.

Normally, those soliciting funds will set up a profile of their project on a crowdfunding website. They make use of social media marketing to supplement their typical network of family members, friends, and colleagues.

Types of crowdfunding

  1. Donation / Reward crowdfunding

When people invest, it means they believe in the project. In reward crowdfunding, investees offer rewards like gifts, tickets to events, acknowledgments in a book or on an album, and so on.

In donation crowdfunding, investors invest without expecting anything back. They simply want to feel good about helping other people.

  1. Debt crowdfunding

In debt crowdfunding, investors lend you money which you are expected to pay back with interest at a given period. Also known as peer-to-peer lending, you can borrow money without going through the strict requirements that banks usually ask for. Investors do not become part owners of your business and instead earn through interest.

  1. Equity crowdfunding

Using equity crowdfunding, investors finance your business in exchange for equities. They become part owners of your business, meaning you will not have full control of your company. The advantage of equity financing is that you are not obliged to pay your debt in case your business does not do well.

Case for crowdfunding

  1. The primary advantage of crowdfunding is the ease with which you can get the capital you need to start your business. Sometimes, it is even cheaper than taking a loan from a financial institution.
  2. There are no strict requirements to meet, unlike when you go to a bank to get a loan. Projects that remained on the drawing board can now get a chance to take off through crowdfunding. It is a great back up finance option if you fail to secure a bank loan.
  3. You can get publicity for your business just as you are about to start. Crowdfunding projects can generate a lot of headlines, enough to make the public curious about your business and its offerings. At the same time, it can be a nice way to gauge public reaction to your product offering.
  4. Pitching your projects through any of these online platforms that involve crowdfunding can give you plenty of opportunities to market your product. You can also get expert advice from experienced investors.

Case against crowdfunding

There are downsides to crowdfunding as well. Here are some of the reasons why you should think twice about turning to this option.

  1. There is a low success ratio as far as getting the funds for a project is concerned. Low, as in only 1% or 2% are funded. So if you want to go the crowdfunding route, you will have to manage your expectations. You should have an airtight business plan to present to investors to improve your chances of success.
  2. There is a downside to making your pitch in public as well. Somebody else might steal your idea since you are required to reveal what your ideas are. Be sure to protect your idea with the appropriate patents, licenses, or trademarks before presenting it to the public.
  3. You need to achieve your funding target, otherwise, you will have to return the funds and you will end up with nothing.

The high cost of running a crowdfunding campaign

Crowdfunding, while a means to get financing, does not mean you can join without spending for it. There are costs you should prepare for when launching a crowdfunding campaign. 

  1. Marketing costs

You will have to let everyone know that you have an idea, which means there will be advertising and promotions involved. These will require a budget.

  1. Platform fees

Crowdfunding platforms normally charge a fee for running your campaign. This is separate from processing fees and can be as high as 7.5%.

  1. Product designs

You have to set aside a budget for product and design costs if you are manufacturing a product. 

Marketing channels and their costs

There is a myriad of crowdfunding marketing channels available to you, and each one with different costs. So you will have to consider your budget when picking a marketing channel.

  1. Crowdfunding platforms 

The most popular among founders to launch a crowdfunding campaign. Kickstarter and Indiegogo are two of the most established platforms. Indiegogo charges a 5% platform fee and a 3%-5% processing fee. Kickstarter charges similar rates.

  1. Blogs and landing pages

Landing pages and blogs can be effective tools in running your campaign. Costs include payment for websites, domain hosting, graphic designers, and content creators. Here are a few sample costs:

  • Website design: $1,000 to $50,000
  • Website hosting: $3 to $15
  • Domain registration: $10 to $15
  • SEO – $2,000 to %10,000
  • Content creation – $60 to $300
  1. Email marketing

Who says email is antiquated? Digital marketers all agree that email is still the most effective marketing method that they use. You can use third-party email marketing services like Mailchimp. Prices range from $0 to $299. 

  1. Social media

Social media marketing targets specific groups of people who are interested in your niche. The cost depends on the number of days, the number of people targeted, and the areas where you want to run your campaign, but can be quite costly depending on who you are targetting.


As you can see, crowdfunding can be advantageous as well as expensive for business owners. Before you decide on crowdfunding for raising capital, you may also consider other forms of financing. Study each one carefully before you decide, as this could determine the ultimate success or failure of your business.  


How To Get A Small Business Loan Approved: Do’s And Don’ts

Acquiring a small business loan approval enables entrepreneurs to secure additional financing to launch your startup or make your business thrive further. To qualify for a business loan, demonstrate proof that you can return the loan with interest on time. Completing the application for a small business loan may seem like a daunting process due to the volume of documentation and transparency required by the lender. 


Various funding options qualify as small business loans, but the most common types are credit or bank union, and term loans from a financial institution. Trusted lending institutions provide low-interest rates through a term loan. This type of loan is considered one of the most preferred funding options for entrepreneurs due to its affordability despite the substantial paperwork and good financial standing required.

Small business loans could be issued as microloans that can range from a few thousand dollars to a more substantial amount that can exceed a million dollars, with a term of one to five years or more, depending on the case. The small business loan interest rates can amount to 2% up to 8% in general. The interest rate is based on the credit rating of the borrower, as well as the requirements of the lender.

The level of difficulty in obtaining the approval of a small business loan not only lies in the financial institution’s required documentation but also in your current financial standing. The following guidelines will enable your application towards a smoother process on how to get a small business loan approved. 

Here are the DO’s in better positioning yourself to secure funding for your business.

Identify the type of loan you need 

Understanding the reasons why you need a loan and how much should ensure that you accept the type of funding most suitable to your business’ needs. Defining the core reasons and loan usages also help entrepreneurs apply strategic management in handling it to avoid financial burden. Aside from that, lenders review the justification for outside financing applications.

Generally, there are four categories that the common applications fall on.  These are: launching a business, managing the daily operating expenses, expanding the business, and building a safety net. 

Your justification determines the type of small business loan you can apply for. For instance, if the reasoning falls on the category of launching a business, then it is quite impossible to obtain loan approval from an online lender or bank in your company’s first year. 

Startups are normally disqualified from financing because lenders oblige the borrowers a steady cash flow for completing the loan repayment along with the interest charges. In this case, startup company owners can rely instead on personal loans, business credit cards, and borrowing from family and friends, among other types of startup financing. 

For businesses that have operated profitably for more than a year, there are several other financing options. Repayment terms, however, can affect the long-term viability of your business. 

This is why choosing the type of loan is critical; it should work for you and your company’s goals. 

The following items are the most common types of business loans, together with their standard requirements: 

  1. Bank Loans (US Small Business Administration or SBA Loans)

Requirements and considerations:

  • Good credit standing 
  • Collateral 
  • The government provides a fixed Annual Percentage Rate (APR)
  • The longer turnaround time to secure funding approval 

Before checking alternative lending sources, companies tend to prefer traditional loans funded through the SBA due to their highly competitive interest rates. Small businesses also prefer this because the SBA guarantees the loan instead of having the borrower present a personal guarantee. Loan rates range from 2.25% to 4.85% with a loan amount of up to $5 million. 

  1. Online Lenders

Requirements and considerations:

  • The shorter turnaround time to secure funding approval
  • Lower maximum loan amounts 
  • Variable APR 
  • More flexible credit prerequisites

Companies turn to this option when traditional banks decline the request for funding or the need for external funding is required sooner. Online lenders provide a solution for businesses in dire need of immediate loan approval and processing to quickly improve their cash flow, as well as those without good credit histories. These loan companies issue approvals faster with higher APRs and the need for collateral is no longer required. 

  1. Microloans 

Requirements and considerations:

  • Collateral
  • Good credit standing
  • Short-term repayment schedule
  • Competitive APR

Microloans are part of the lending programs funded through the SBA. The loan amount averages around $13,000, with programs specific to funding working capital, equipment or furniture purchases, inventory replenishment, and rentals, among others. Microloans also offer low-interest rates, however, presenting collateral and having a solid credit history is required. 

  1. Alternative Loans 

Requirements and considerations:

  • The quick turnaround time to secure loan processing
  • Short repayment timelines 
  • More stringent loan terms
  • Flexible credit prerequisites

Alternative loan options cover merchant cash advances, P2P loans, and invoice factoring. These have gained popularity among companies requiring additional funds over the past 15 years or so. 

Merchant cash advances are the most suitable lending programs for businesses with a high volume of credit card transactions. These are quite a short term in nature, with a repayment schedule spanning shorter than three months. 

The loan payment process entails having the lender take a percentage of the daily sales based on the lending terms. Meanwhile, P2P loans are lending opportunities with a fixed interest rate that provides repayment schedules completed between two to four years. 

Lastly, invoice factoring is a type of lending opportunity that pays upfront all unsettled invoices. The repayment schedule is completed within 90 calendar days after the clients’ invoice payment.

Compare small-business lenders

Online lenders, nonprofit microlenders, and banks are the three types of loan providers. They offer loan options such as credit lines, accounts receivable financing, and term loans. 

Online lenders are most suitable for funding when you quickly need the funding yet lack collateral. They provide small-business loans amounting from $1,000 to $5 million with average annual percentage rates that range from 6% to 99%. 

The APR depends on the amount and type of loan, lender, repayment term schedule, the borrower’s credit standing, and if there is required collateral. Online lenders typically have much higher APRs than traditional banks. However, they have higher approval rates and offer much faster funding, some in as fast as 12 hours.

Banks are the preferred small-business lenders if you can guarantee collateral, prove good credit history, and have a sufficient timeframe to wait for the funding. These traditional bank options offer commercial mortgages for refinancing or buying properties, lines of credit, and term loans. 

The SBA provides general small-business loans through disaster loans and short-term microloans, and it is a popular 7(a) loan program with loan amounts ranging from $500 to $5.5 million. Obtaining funding from banks takes the longest time compared with other lenders. Nevertheless, they provide loan options with the lowest APRs. Low revenues, cash reserves, and poor credit standing are the leading factors affecting the loan approval rate from banks.

Microlenders are there to assist in providing traditional loans for small companies. They are nonprofit organizations that offer short-term funding of less than $50,000. The loan size is considered as “micro” in amount, yet startups or smaller companies with a limited number of years in operations, and lack of collateral can apply from these lenders. The application involves submitting financial statements, loan justification, and a detailed business plan. 

Qualify for small business loan approval 

This step is the most crucial on how to get a small business loan approved. Securing funding from lenders means you have proven that you can repay the loan with interest on time.

Demonstrating this ability is the primary interest of the lenders to proceed with the approval of the small business loan. Here are four guide questions to check if you can qualify for a small business loan.

  1. How long has your company been operating?

If your company has been in business for at least one year, then you can qualify for most online small business loans. Meanwhile, companies with at least two years of business operations are granted most bank loans. 

  1. Do you have enough cash flow generated through revenues? 

Lenders have a minimum annual revenue requirement ranging from $50,000 to $250,000. Calculate your yearly cash flow from revenues to check if you comply with the needed threshold before submitting your application. 

  1. How is your credit standing? 

Review your credit report free of charge from among these three major credit bureaus: TransUnion, Equifax, and Experian, or obtain your credit score for free from personal finance websites or other credit card issuers. Banks favor borrowers with credit scores above 680. 

  1. Can you comply with the required repayment schedule?

Carefully assess your financial standing, specifically your company’s cash flow, to check if you can fulfill the repayment timeline. It also enables you to plan and prepare your finances to strategically manage the repayment schedule and maximize the loan amount.

Complete the required documentation

It is crucial to demonstrate your business’ commercial standing, credit history, and financials through corroborating documents. Preparing this early on enables ease of accessibility to streamline the process of your business loan application. 

Standard small business loan programs require sharing of all the company’s financial details, along with your financial standing, as well as the business’ growth plans stating how the requested capital will enable the company’s expansion. 

Depending on the loan provider, submit each or a combination of the following documents:

  • Business plan.
  • Business permits and licenses
  • Business and personal tax returns.
  • Business financial statements.
  • Business and personal bank statement. 
  • Business legal documents like permits, licenses, commercial lease, franchise agreement, and so on
  • Business and personal credit scores 

Submit your small business loan application

Select the loan type with the lowest APR and most suitable payment schedule among the loans you qualify for. Prepare the documents you have gathered, submit your loan application, and patiently await the approval of the funding for your business. 

The Don’ts

Meanwhile, here are the DON’Ts to help you avoid mistakes in obtaining the funding approval you need for your business. 

  1. Showing limited cash flow

Cash flow evaluation is crucial for loan providers because it helps gauge the commercial health of your business. Essentially, it is the main consideration in proving that you can afford a loan. To check the loan amount that you can afford, you can calculate the debt service coverage ratio by dividing your net operating income by your total annual debt. Having a ratio of 1 means that your monthly loan payments are equal to your cash flow, showing a healthy financial capacity for your business. Lenders prefer selecting borrowers that can prove a ratio of 1.35 to show that the business has a buffer in their cash flow for handling debt coverages. 

  1. Presenting poor personal and business credit histories

Lenders refer to credit reports as their tool in determining a borrower’s credibility. Showing a lack of due diligence in completing the repayment of past loans is a huge factor in being rejected for your new loan application. 

  1. Not having an established and solid business plan 

A comprehensive business plan is crucial for showing your financial projections to maximize the terms and amount of the funding you are applying for. A sound, documented justification with proof of business growth and expansion will help you build your case for a smoother loan application approval. 

  1. Not seeking the advice of financial experts

Small business owners can rely on their accountants as an important source of advice, especially in assessing the required working capital for the business. Plenty of resources are available for detailed information on the types of capital funding and preparing for loan applications. Financial counseling from experts in your market and industry will also help you gain more insights into your business plan and strategic funding management. 

  1. Not allocating the time and effort to shop for the best lender and loan type

Business owners must take the time to research and explore each option that best fits your business requirements. Ensure that you understand each term and condition of the loan type and lender you can shortlist as top choices for the funding you need. Review and compare the real annual cost of your loan options through evaluating the APRs plus additional charges side-by-side, making sure that you can carry out an apples-to-apples comparison to choose the best funding for you and your business. 

Determining your needs and proceeding with a small business loan application are challenging. Keeping in mind these guidelines will help you ensure a more streamlined and less daunting loan application approval. 


Always remember that lenders want to get their money back on time, which is why they will approve only applicants whom they deem worthy of getting their money.

If you can show them that you are capable of paying back your loan with interest in the agreed-upon timeframe, then you will likely get approved for that loan.


The Ultimate COVID-19 Survival Guide For Businesses

There is always that moment in history where people are called upon to become bigger than what they are. For our generation, COVID-19 is a test of our collective ability to face adversities. 

We are told that the effects of the pandemic on the economy will be unprecedented. This means every business owner, and every one of us for that matter will be put to the test.

For sure, we have all been placed in a very unfamiliar and uncomfortable spot. There are no applicable playbooks available anywhere for what is happening now, so we try to learn on the fly.

These times are hard, risky, and unpredictable. For businesses, only the fearless and strong will survive. We can either choose to wait this out and see what would happen next year or face the issues head-on. This will be our battle.

For entrepreneurs who want to rise above all this madness, here are some tips on how you can stay afloat amid COVID-19.

What we know so far about business conditions during the pandemic

The current crisis has deeply affected many businesses, especially those in the small business sector. Data from Yelp shows that 163,735 businesses closed as of August 31. Most of these businesses are brick-and-mortar shops like retail stores, restaurants, bars, and coffee shops as people remain locked in their homes. The number of restaurants that were forced to close down is 32,109 and counting. 

Nightlife venues found it hardest to adapt since they sell not only food and drinks but also the experience. According to Yelp, 6,451 bars have closed.

For retail businesses, there were 30,374 closed stores due to the pandemic.

We also see a direct correlation between closure and unemployment rates. We all probably know someone who lost a job because of the pandemic.

Larger cities like New York and Los Angeles have seen the highest closure rates, whereas smaller cities seem to be more forgiving to small businesses. 

Strategies to keep your business afloat

Here are some practical methods you can adopt to enhance the possibility that you and your business survive and come back stronger.

Tip # 1: Make tough decisions

Focus only on the things that you can control, and then face them head-on. You will spend less energy if you only think about how you can solve issues that will help you survive the situation. 

To survive, you must be willing to make tough decisions. We are all going through hard times, so do not be afraid to assess your situation realistically. Think about your resources, your cash flow, and your expenses. Cut down on things you cannot handle for now. If you need to lay off some employees, do so but in a kind way. Or you may reduce their work hours and arrange their shifts in a way that would help you not to cut anyone. 

Doing nothing but hiding may be tempting right now as we are being wrapped by uncertainty, but doing so would achieve nothing. Facing reality and taking action is the only way to go.

Tip # 2: List all expenses and cut unnecessary ones

This time around, you need to determine what is necessary and what is a luxury. If you have automatic payments that you can survive without, then stop. Lenders would rather give temporary relief to borrowers rather than not get paid at all.

Ask lenders for payment deferrals on mortgages, loans, or leases. You may also try to renegotiate the terms on leases or rents. At the same time, you can also renegotiate with your customers for new payment deals.

If the government offers you financial support, take advantage of it. Remember that at this time, there is no shame in getting help for your business. The economy is counting on you.

Tip # 3: Exhaust all means before laying off employees

Letting go of your people will perhaps be the hardest decision you can make, so hold on to them as long as you can. Getting great employees and training them in the future costs plenty of money and time.

What you can do is review benefits and bonuses. Maybe you can hold off club memberships, discounts, and wellness programs at least until everything goes back to normal.

Reducing payroll may sound cruel, but more people are willing to take pay cuts rather than lose their jobs. You can also try running with a skeleton crew. Look for feasible options before letting go of your people.

Tip # 4: Invest in marketing

This may sound counterintuitive, since you may not have the budget to invest in anything. But this is not the time to remove marketing if you are running a business. It is important that the general public still knows you exist.

You can be creative with it and avoid spending too much. Social media, for example, is a powerful tool you can use for free. Grow your followers by running a contest, or making yourself newsworthy. Use inexpensive ways to reach customers like your email list.  If you do not have a robust client database now is the time to grow it. 

Getting in touch with your client base is now more crucial than ever. Take time to help them in their time in need, and they will never forget you.

Tip # 5: Think ahead

Thinking ahead means giving your business options. Concoct scenarios that may happen. Now that we are in a new reality, many things will change. Revising your business strategy is something you can consider since your current one might not have taken into consideration the new realities.

Another way of thinking ahead is to diversify your source of revenue. Relying on just one source of income puts you at risk. You can offer a wide range of products and services to help you through this crisis. While it is true that there are plenty of successful companies that have a single product like Crocs, most have become successful because of diversification like Coca Cola Co.

Now will be the perfect time to think about new ways to strengthen and grow your business.

Tip # 6: Look for support

Join forums and online groups with like-minded people. For sure, they are also looking for some help. 

Talking to other people gives us other perspectives. Research shows that people who belong to a community do better when adapting to difficult situations like the one we are in now. Many people need assurance.

Tip # 7: Be a resilient leader

Do not give up. Accept the challenges and rise to the occasion. Remind yourself that you will beat this. Just keep moving forward.


These steps should give you a roadmap to help you survive this crisis. As long as you put in the effort and stick to your strategies, it is possible to be stronger and more efficient once the smoke clears.


Is SEO a Good Business Investment or a Scam?

There is a lot of buzz about Search Engine Optimization, or SEO. Many companies find that SEO is becoming increasingly necessary for boosting their brands and increasing their sales. 

Yet, many small businesses tend to neglect this facet of marketing – often to their detriment.

For old-schoolers, traditional marketing is still the best way to get the word out about their goods and services. This old way of marketing still works but is no longer as powerful as it once was. While baby boomers and Generation Xers are still a force to reckon with – two generations that still use traditional mediums – businesses aim to reach millennials and Generation Zers as they are newly dominating the market. 

SEO experts extol the virtues of search engine optimization as it helps your website reach the top of Google’s search pages. Indeed, it is an enticing proposition if you are running a business.

So, what is the role of SEO in all of this? Should business owners build up their SEO efforts? Or is it a scam spearheaded by Google itself?

What is Search Engine Optimization?

According to Moz.com, SEO is the method of improving the quality of traffic and increasing its quantity via organic search results.

Organic search means any free traffic coming from search engine results pages or SERP.

To further get a grasp of what SEO means, let’s define its parts.

  • Quality of traffic means visitors to your page who are genuinely interested in what your business offers. 
  • Quantity of traffic is the number of the right people who are visiting your page.
  • Organic results mean traffic you do not have to pay for.

Simply put, SEO will help you reach the first page of any search engine, the most important of which is Google due to the sheer number of its users.

How SEO works

Most people associate SEO with Google, but it is also used in other search engines like Bing, Yahoo, and Mozilla.

On these websites, you simply type what you are looking for. The search engine then instantly brings you a list of websites that are related to your query. 

Search engines have what they call crawlers. These crawlers go out to gather information about all the content they can find on the web. The crawlers bring back all the data they find and create an index. It then sends the index through an algorithm that seeks to match all the data with your search.

The value of SEO to your business

  1. SEO can deliver a high return on investments

When done properly, SEO can be one of the best marketing strategies you can invest in. 

Some business owners try to learn SEO in a hurry, expecting to get results just as quickly. However, this hurried approach rarely works and often results in failed attempts. It is then followed by the assumption that SEO does not work.

The truth is, SEO is a strategy that does not produce instant results. It is a long-term strategy that involves investment not only in money but in time as well. If you are willing to put in both of these, then you will realize optimal results.

  1. Traffic created through SEO converts into sales 

People who need the services of a food catering company would go to the internet and search for food catering services. If you own a food catering services company, you want to be on top of the search page so that customers can easily find you. Customers normally stop on the first page and rarely reach page 2 of any search. 

  1. The web enables businesses more than any other medium

Television, radio, and newspapers are the traditional medium for marketers, but their relevance is slowly diminishing. Whether we like it or not, the internet is the new battleground for businesses to market their products. 

The web is now the first thing consumers go to when searching for a product or service because it is so easily available. It also levels the playing field for businesses who otherwise cannot afford to pay for ads on tv, radio, or print. Everyone can utilize SEO, even small businesses. 

  1. Without SEO, you may be left behind 

Almost all businesses are using SEO in their marketing efforts. If you are not utilizing it yet, then you are probably eating their dust.

SEO can help potential leads find you. If you do not have an SEO strategy, those leads will go to your competitors.

A good SEO strategy also allows you to rank higher in search engines over your competitors, especially if your strategy is better than theirs.

We have discussed the value of SEO, which you can do yourself or with the help of SEO professionals.

However, it is important to choose the right experts as there are many scammers out there trying to take advantage of the wonders of SEO.

One such scam comes from an unsolicited email that a so-called SEO expert sends you. This “expert” will try to sound friendly and will tell you that they audited your website and noticed that it is underperforming. 

The scammer will then tell you that there are errors that are causing your page to perform poorly, but that they have the solution which will push you up to number 1 on Google search results. The scammer will then direct you to get in touch with someone from a faraway place.

Most of these emails are phony. Chances are, nobody took the time to analyze your website. If you received one like this, there are probably hundreds more who also did. If you respond to this email, the scammer will receive your contact information and sell it to companies who do incompetent SEO work.

Here are some tips on how to spot SEO-related scammers.

  • The email is unsolicited.
  • The message is written poorly.
  • You receive the same pitch from several senders.
  • There is no company name.

Pitfalls of SEO

SEO will take plenty of your time. If you plan to do it yourself, then you will need to study it thoroughly. The good news is, there are plenty of online courses that will teach you everything you need to know about SEO. You can get some of these courses for free and some are paid courses.

Studying SEO is also not a one-off deal. What works well today may not work tomorrow, or next week, or next month. You should always stay up to date on new developments in the industry. 

Another thing you must remember is that you will probably not see results from all your efforts until around six months or even longer. That is because you need to build up the quality and quantity of traffic for your site, and it will not take days or even weeks. Be patient.

Bottom line

Investing in SEO is a good way to future-proof your business. The more optimized your page is, the more chances your customers will find you. If you look back a year from now on what you did for your business, you will likely be glad you started to put a solid SEO strategy in place.


The USA vs Abroad: Where to Spend your Golden Years?

Americans who love to travel, or those who want to travel but were unable to do so during their working lives, are often the ones who decide to move abroad during retirement. 

Exploring other cultures as well as engaging in more adventures are enough reasons to move to another country, but there is no doubt that the financial benefits of living outside the U.S. are just as enticing. 

The financial perks that Americans enjoy go far beyond the power of the almighty dollar. Americans who live abroad enjoy more financial freedom and benefits that let them increase their savings, reduce expenses, and meet their financial goals. Some are even able to start businesses that they otherwise would not be able to establish while living in the U.S.

Not everyone wants to settle abroad though. Most people would still rather live near their family and friends. 

If you are still in the planning stages for your retirement and are on the fence between staying in the US and abroad, let’s help you make that decision.

Why Stay in the US?

Most retirees stay right where they are or move to another city or state. Only a few relocate to another country, and family is their biggest reason.

There are many pros to retiring in the US. Here are the main reasons why retirees stay at home.

1. Grandkids

Children bring them so much joy and make them feel young again. To them, nothing beats the feeling of spoiling their grandkids.

2. Professional connections

A person’s network is his or her net worth. These connections come in handy for those who wish to get part-time work or stay engaged in business dealings during retirement.

3. Established social networks

There is nothing like being with old friends; friends who were always there in good or bad times. Having them around helps retirees stay mentally and physically engaged without needing to look for new friends.

4. Convenience and stability

There is a certain level of stability and predictability when you are close to home, and along with it is convenience. You know where to go to buy important items, where to go for medical care, who to approach for your plumbing issues, and more. 

5. Comfort zone

Retirees can continue living their routine activities.

Cons of staying in the US

Some things definitely could stand improvement when retiring in the U.S. Here are some considerations for you when thinking about staying in the U.S.

1. It may be costlier staying in the U.S.

There is nary a doubt that living expenses in the U.S. are much higher than in many other countries.

2. Expensive healthcare

Healthcare costs in the U.S., while care is top-of-the-line, are very expensive. You can find quality health care providers abroad at a lower price. 

3. Same old, same old

Many people are content with the same scenery and situation for the rest of their lives.  But for other adventure seekers, staying put may inhibit the opportunity to learn something new, enjoy new experiences, and meet new people.

Why Retire abroad?

Bilbo Baggins, J.R.R. Tolkien’s beloved character from The Hobbit and The Lord of The Rings, always had this fond desire to go on one last adventure, and by the time he was 111 years old, he left his home for another trip and never came back. 

It is the same kind of passion for travel that leads many Americans to leave their homes and settle abroad. Depending on your preferred destination, retiring abroad can be quite an adventure. Choose from the peaceful beaches in Thailand or the vibrant city life in Brazil or England’s hundred-year-old castles; you will never run out of options that can match your preferences in terms of activities, weather, landscape, and culture.

Here are some of the pros of living abroad.

1. Low cost of living

This is probably one of the biggest considerations for most retirees. They can live comfortably without spending too much on their retirement savings, as living expenses are often a fraction of the cost of living in the U.S.

2. Newfound freedom

Retirees find a new kind of freedom that they would perhaps never experience back home. Away from the prying eyes of relatives and friends, they can live the life they want.

3. Healthcare is more affordable

Quality healthcare is always available worldwide, and at cheaper costs.

4. Retiree benefits

To attract new individuals with money to spend, several countries provide incentives to foreign retirees. This would depend on whether you meet their minimum income standards.

5. Realize your dreams

Retirees can learn a new culture, a new language, enjoy new cuisine, pick up new hobbies, and meet new people.

Drawbacks of retiring abroad

On the other hand, retiring abroad can also have its drawbacks.

1. Double taxation

Depending on where you decide to relocate, you might end up paying taxes both abroad and to Uncle Sam.

2. Distance

You will be living far away from your family and friends. No amount of Zoom meetings can make up for being present with them.  But depending on where you relocate, many friends and family may be enticed to visit.

3. Language difference

While you will find many people abroad who know how to speak English, you may have to learn the language of your preferred country. 

4. Instability

The US. enjoys a certain level of stability politically and economically. Not all countries can claim the same.

5. Reality may be different

You may have fallen in love with the country during your holiday, but sometimes the reality of living there versus vacationing may be worlds apart. Do a complete background check on your chosen country before relocating.

6. Daily challenges

Buying necessities might be a challenge, though you will get used to it over time.

7. Support

Finding support may be difficult when something goes wrong.


You should explore the different advantages offered by staying in the U.S. or retiring abroad to figure out which is the best fit for your financial requirements. By determining the appropriate location, you can build personal wealth and achieve your financial goals faster.

Do some soul-searching, and perhaps take a trip abroad to find out how it feels to be there. Learn more about these countries before making a decision. And remember, just like a father to his prodigal son, Uncle Sam will always be willing to take you back.


We Are All Living Longer, Start Planning For Your Retirement

Did you know that humans have longer life expectancy now more than ever? We are now living 26 years longer than people were in the 1950s.

Essentially, that means that if you are 50 years old today, you are only 24 years old! And perhaps, the first person to reach 1,000 years is already alive today.

That now brings us to the topic of retirement and how important it is to prepare for it today because, well, a longer life does not necessarily mean a better quality of life. How many times have we heard stories of elderly people living on the street, or former professional athletes who were once millionaires now living in a friend’s basement because they were unable to save money for retirement?

Planning for retirement is a vital part of financial planning. It ensures you a more financially independent lifestyle in the future. This article aims to guide you in planning for when that day comes so you can live comfortably long after you have stopped working.

Why is retirement planning important?

An effective retirement plan means should be a combination of financial and personal planning instead of just concentrating on your finances alone.

Personal planning establishes your satisfaction during retirement. Financial planning, on the other hand, lets you wisely budget your income and expenses based on your plan.

Personal planning lets you determine how you want to spend your retirement. With an idea of how your retirement should be, you will know what your financial needs are. For instance, you might want to travel the whole world after you retire as it is something you are not able to do while working. Or you may want to volunteer at a charitable institution. 

However, you will also have to think about your lifestyle preference, and this is where financial planning can help since it will assist you in creating a fund for retirement.

Here are some of the reasons why retirement planning is important.

  • Life expectancy is ever-increasing.
  • You cannot work forever.
  • You need to prepare for medical emergencies.
  • Retirement is the time to complete your bucket list.
  • You cannot rely solely on pension.
  • You cannot, and should not, depend on your children.

It is important to start planning and investing in retirement so you can live a peaceful and independent life later on.

1. Live a stress-free life

When you start planning for your retirement today, you will not feel as much stress today and during retirement, because you know you will be ready. Go for investments that earn regular income during retirement. Remember, retirement is the time where you should enjoy all the benefits of what you are working hard for right now.

2. Tax benefits

Planning your retirement also has some tax benefits. Roth IRAs and Roth 401(k) plans are retirement accounts for tax-free investing. The benefits will come when you reach 59 years and six months old in a traditional Roth IRA, at which point you can start withdrawing your money. 

A Roth 401(k), on the other hand, is a tax-free retirement savings plan offered by employers. If you are self-employed, you can get a solo Roth 401(k). You can withdraw your money tax-free after you retire.

3. Let the money work for you

You work to earn money, but you cannot work forever. Retirement is the time to switch roles by letting the money work for you by investing in various asset classes towards the future. Make sure you have a diversified portfolio that can generate income for you regardless of the economic cycle.

4. Beat inflation

Investing in your retirement helps you earn substantial returns that beat inflation. This would not be possible if you merely place your money in a savings account.  

How much money do you need to set aside for retirement?

It is important to think about how much things will cost by the time you reach the age of 60. For now, we do not know exactly what those prices will be. You can base them on the average inflation rate in the United States. Over the last century, the average inflation rate in the country was 3.22%. You need to expect higher prices by the time you retire. 

You will need to consider your everyday expenses, like food, utilities, and medical.  Keep in mind that some of the heavy expenses you have today will probably no longer exist by then, like your kids’ education and mortgage.

Then, add all income you might receive after retirement, including pension, social security, rental income if any, and others. Match these with your future expenses so you can get a better idea of what you will need to put aside each year before you retire.

1. Understand your time horizon

How old you are now and your expected retirement age can build the initial framework of a good retirement plan. If your retirement age is still far away, you can take higher risks. Place a majority of your investments in riskier assets, like stocks. Stocks normally outperform other securities over long periods, which is suited for younger investors.

When you get older, your focus should be on preserving your capital. Invest more on the much safer bond, which gives lower returns but is less of a risk.

2. Compute after-tax rate on investment returns

Once you figure out the expected time horizon, calculate the after-tax real rate of return so you can assess the viability of the investments returning the needed income. A required rate of return of more than 10% before taxes is not a realistic expectation. As you get older, this return threshold diminishes since low-risk retirement investments are usually composed of low-returning fixed income securities.

Most investment returns are taxable, so you need to calculate the actual rate of return after taxes.

3. Evaluate your tolerance for risk against your investment goals

Perhaps the most crucial step in retirement planning is assessing your risk tolerance versus your return objectives. Know how much risk you can take to meet your goals. Talk about this with your family members and financial advisor. You need to be long-term “greedy” and not bail out on your investments at first signs of trouble. 

4. Be on top of estate planning

Estate planning is also a major step in a sound retirement strategy. It often requires expert advice from professionals like accountants and lawyers. Carefully outline your plan to avoid expensive probate processes in the future.


Whether you want to retire at the age of 40 or 70, creating a comprehensive retirement plan is a necessity. The challenge here is to strike a balance between realistic earning expectations and a desired standard of living.

The best solution for this is to create an adaptable investment portfolio that you can regularly update to keep up with the volatility of the market and your retirement goals. 

Man Hand writing Bootstrapping with black marker on visual screen. Isolated on background. Business, technology, internet concept. Stock Photo

Funding my business – Bootstrapping or Investors?

Which one is a better option for funding your small business? Bootstrapping or investors?

You may have that big idea to make you become the next Google, Facebook, Uber, or Airbnb, but if you do not have the capital to put that idea to action, then it would be all for naught.

Forming your own company is truly taxing physically, emotionally, and financially. Most likely, you will need a group of talented employees, a website, an office space, and enough cash to pay for utilities. It is advisable to have at least six months’ worth of funds set aside to pay for all these requirements.

Of course, you can dig deep into your pockets and pay for everything yourself. A lot of people have gone this route, but what if you do not have enough funds in your bank account?

The good thing is, you are served a plethora of funding options to start your small company. All you need is the right information to take full advantage of what is available to you. Today, we will help you carefully analyze which method of financing best suits you.


When we say bootstrapping, you will be using your current resources to jumpstart your business. It does not have to be entirely about cash; you can use your laptop or personal computer, your garage space, and other stuff that can help you put your ideas to reality.

You can maximize all your resources to minimize costs and grow your business. After your business is off the ground, you can use the income earned to fund your company.

We list below how you can bootstrap your business.

  1. Renting your home

If you want to, your house can be a potential income generator and a good option to fund your startup. You can use Airbnb or other platforms to rent out your house or a spare room for a few nights every month.

  1. Crowdfunding

Crowdfunding is another option you can look into. There are online crowdfunding platforms wherein you can pitch your idea to thousands, or even millions of people who are interested in investing in startups like yours. If your business plan is good and they like your idea, each investor would contribute a few dollars. In exchange, you can give them some perks or rewards like souvenirs or samples of your products.

You can take a look at Kickstarter or Indiegogo if you are curious about this form of funding.

  1. Personal credit cards

Some entrepreneurs charge their credit cards to fund their companies. While credit cards charge high-interest rates, keep in mind that as long as you pay in full each time the bills come, you are virtually borrowing money for free!

  1. Personal savings

If you believe in your idea or product, then you can use part of your savings. You would not owe anyone any money, so you are answerable to no one. The downside is that this might take years before you get enough money to start your business.

Bootstrapping advantages

  1. The business belongs to you

One great advantage of bootstrapping is that you have 100% ownership of your company. You do not have to answer to anyone, and you can run it the way you deem fit.

When you seek investors for financing, they generally take a certain portion of shares in your company. Most of them also seek voting rights, so you cannot just make any decisions that you think would help your business by yourself. With bootstrapping, you are in control

  1. You practice better budgeting and spending habits

Since you know it is your own money, you will most probably be more careful spending your budget than if it was other people’s money. It is what it is.

  1. Bootstrapping is rewarding

Bootstrapping is tough. You will have to sacrifice your savings and stick to a budget. But, if you are willing to commit, then you will find it rewarding.

You should build an airtight bootstrapping strategy then go all-in on it. Indeed, it is hard work and is not for the faint of heart, but it will give you total control when bringing your passion – and your business – to life.

Bootstrapping disadvantages

  1. You might find yourself deep in debt

We mentioned earlier that using your credit card can be a good way to fund your business, but it comes with a big IF. You must pay off the whole amount you charged every time it is due, or at least as close to the full amount as possible. Do not make minimum payments as it will only result in more debts due to interests and thus potentially ruining your credit history and your cash flow.

Another reason why you should be careful not to incur too much debt is that if you invite investors to invest in your company, they may want to look at your credit. If they see that you are deep in debt, they might not lend you money.

  1. Revenue is limited

It may be unfair, but only businesses with huge funds are capable of scaling. If you are bootstrapping your business, you are limited to your funds when running your business. Unless you are Jeff Bezos and have an overflowing supply of cash, your revenues will somewhat be limited.

Your startup should therefore be generating income through your products or services so that your company can stay afloat. One day when you decide that it is time to scale up, future investors will see how your company earns revenue.

Raising funds through loans or investors

If bootstrapping is not for you at this moment, you still have other financing options.

  1. Equity funding

You can raise capital through the sale of shares. Investors will purchase shares in your company, which would mean they will be part owners of your business. You can invite family or friends to purchase stocks or go public via IPO.

The advantage of equity financing is that it will be easier for your business to grow. You will have more funds, and investors can also act as mentors who can help you improve your business.

Since your investors are your co-owners, you do not incur debt. If your business does not become successful, you do not need to pay them back. Your business also does not need to pay interests.

There are disadvantages, however. The biggest one is that you will lose full control of your company. The rights to your ideas, your business plans, and decision making will also belong to other people.

  •  Angel investors

Angel investors are usually well-established individuals with high net worth and are looking to help future startups. They invest in the early stages from $10,000 to millions.

  • Venture capitalists

If you decide to approach venture capitalists, you need to have a business plan devoid of holes. In exchange, they might give you large amounts of cash for your business.

Venture capitalists invest in several startups on behalf of their clients with hopes of making money for their clients and themselves. You are therefore up against plenty of competition, and getting the attention of VCs is challenging. This is where your connections can help you; if you know someone who can introduce you to VCs, it would be a huge advantage.

  1. Bank loans

You can go to banks and apply for loans. However, you need to prove to them that you are capable of paying them back.

While it is difficult to get a loan from a bank, getting one means you would not be giving away ownership while getting that much-needed funds to start your business.

Advantages of getting outside investors

Having investors on your side will not only give you access to cash, but also a treasure trove of valuable advice. It will be especially helpful to you if you are a newcomer to the business world.

Disadvantages of getting outside investors

While this is a good way to raise capital, it can also cost you a lot. The more cash you receive, the more equity shares your investors will take.

If you decide to borrow money instead, you will have to pay interest over a fixed period. It could put added strain on you, especially if you are just starting.


Going back to our initial question of which one is better, it will depend on your financial situation. If you do not have that much money or assets yet and cannot wait years to start your company, then bootstrapping is not for you.

Investors, on the other hand, will give you the funds you need to start. Aside from that, they can provide mentorship to make sure you are on the right track. But if you would rather run things by yourself, you might have trouble working with investors.

Regardless of which path you want to take, be sure to be well-informed. If you want to go bootstrapping, you may want to consult with a financial professional first. Financial advisors can help you determine whether you are capable of bootstrapping or not.

If you decide to look for investors instead, choose your investor wisely since you may be working with them for a long time.