Bootstrap financing definition

Bootstrap financing is the process of growing a business more or less organically, without using significant outside sources of capital. Bootstrap entrepreneurs avoid selling stock to raise capital and significant long-term borrowing.

Bootstrap financing will involve, for example, using virtually all personal resources, borrowing from family, barter, credit and consignment inventory from suppliers, aggressive cost reduction strategies, purchasing used equipment, leasing or otherwise leveraging real estate and property, plus a the very close management of the cash flows of the business.

The obvious advantage of bootstrapping is that the founder maintains the equity in the business. On the negative side, bootstrap financing can limit the speed of growth.

Does it work? Many of the world's oldest and most successful brands were started with some level of bootstrapping, especially in the early stages of growth.