Most businesses are financed, at least in part, with personal savings. Sure, it’s hard to save money, but this form of financing has so many advantages, it’s worth some effort. Incidentally, savings don’t necessarily come from a bank account or piggy bank. Lots of entrepreneurs sell or refinance a house or some other valuable property to come up with cash. Starting a business with your savings is the quintessence of the capitalist idea.
As the entrepreneur with capital, you hire people, purchase equipment, and ideally create profits. It’s a long and honored tradition. Henry Ford, John D. Rockefeller, and, more recently, Steve Jobs of Apple Computer all started with at least some money from their own pockets and ended up creating industrial empires. While chances are your goals are more modest, the idea is pretty much the same.
If you finance a business with your own money, you won’t have to worry about making loan payments or keeping investors happy. Think of it this way: The more you borrow, the more you increase your fixed operating costs—making it more difficult to survive the slow periods and mistakes almost every business faces. Another reason to start a business with savings is that you enhance your borrowing capacity for the future.
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The inventory, fixtures, and equipment you purchase with your cash investment are treated as assets should you later apply for a business expansion loan. Of course, not everybody is lucky enough to be able to start or expand a business entirely from savings. But there are at least two ways you may be able to increase the amount of money you can put into your business.
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