SHARE CAPITAL VS DIRECTOR'S LOAN

When you start a Limited Company, you have the choice of what to do with your start-up capital.
You can either loan it to the Company or issue share capital to the value of the money you're
investing.  The question I often get asked is - which one is the best option?

It's an interesting question because while one option will give you a potential tax benefit, there
are other considerations which might make you think twice.

Example:- Rob sets up a new Company with a main activity of selling colour-changing nail
polish.  To set the Company up Rob needs to buy stock of £30,000 and pay for social media
management and a website up-front of £10,000.  Rob will pay for these with his own money.
He has the choice of loaning £40,000 to the Company, repayable on demand, or the Company
can issue 40,000 £1 Ordinary Shares to Rob in exchange for his money.  Which one is
preferable?

LOANING THE COMPANY MONEY

There are no tax advantages to loaning the Company the money.  But that's not to say it should
be ignored.  Although there are no tax advantages, there is a cash-flow advantage.  By lending
the Company money, it can be repaid to you as soon as the Company has generated enough
cash from sales to do so. This might be important if you need the £40,000 for other things (i.e.
you only intended it as a short-term financing option).

ISSUING SHARE CAPITAL

By issuing share capital you're making a longer-term commitment to the Company.  You cannot
choose to have your investment repaid to you as soon as the funds become available.  You can
arrange for the Company to buy your shares back off you, but this option is not straight forward
and will probably result in you incurring solicitors’ fees, which makes this option quite
unattractive.  

OTHER CONSIDERATIONS
So, are there any circumstances where issuing shares might be preferable? You'll note that in
the above example we have only considered what happens if the Company is successful.
However, it is a sad fact of life that 50% of all new start-ups fail within the first 4 years.

If, in our example, Rob loans £40,000 to the Company and the business fails before it pays any
of that money back, then all he can do with his £40,000 loan is carry it forward as a capital loss.
And capital losses can only be offset against capital gains. 

However, if instead of a loan Rob had received shares in exchange for his money, he could
have made a negligible value claim CG13131.  This would allow Rob to set the loss on his
shares against ALL his income in the same year the negligible value claim is made.  Therefore,
if, in the year the negligible value claim is made, Rob had started a job in order to make ends
meet, he could set the value of the shares (£40,000) against his earned income and receive a
tax refund.  Assuming Rob was earning £50,000 this would generate a refund of approximately
£9,000.

Tax tip 1:- We do not know the future, therefore cannot determine which option would be more
beneficial.  Therefore, why not hedge your bets and loan half your capital to the Company and
invest the remainder in shares?

Tax tip 2:- If you are likely to make capital gains in the future (i.e. you have a rental property)
then a Company loan could be preferable because you will be able set any capital loss on the
loan against your future gains on the property.

INVOICE DISCOUNTING VS. FACTORING: WHAT’S THE

BEST INVOICE FINANCE OPTION?

If your business needs an improved and more predictable cash flow, invoice finance could be a
great option. There are several different types of invoice finance, including invoice
discounting and invoice factoring. But when it comes to invoice discounting vs. factoring, do you
know which comes out on top? Find out everything you need to know about invoice financing for
small business with our helpful and comprehensive guide, right here. First off, what is invoice
financing?

What is invoice financing?

Invoice finance is a way to monetise your company’s outstanding invoices. Essentially, your
business is fronted a percentage of the invoice’s value by a third-party in return for a fee
(typically 5% of the total value of the invoice). As such, invoice finance allows businesses in
need of a short-term cash injection to get paid immediately, instead of waiting for days/weeks to
collect payment from the customer. There are two main types of invoice finance: invoice
factoring and invoice discounting. While the concepts are relatively similar, there are a couple of
key differences to get your head around.

Understanding invoice factoring

Invoice factoring is a type of invoice finance that enables you to “sell” some of your outstanding
invoices. In this scenario, a factoring company will pay you around 80-90% of the invoice
amount immediately. Then, after the customers pay the factoring company for the full value of
the invoice, they’ll pay you the remaining amount, minus their fee. Invoice factoring can be an
excellent way for companies with a large number of outstanding invoices to navigate cash flow
problems and improve revenue stability.

Understanding invoice discounting

With invoice discounting, the discounting company will lend your business a percentage of the
money listed in the accounts receivable ledger. In effect, it’s like having an overdraft facility
that’s secured against your accounts receivables. So, how does invoice discounting work? After
you raise invoices for goods or services, the discounting company lends your business an
amount commensurate to the full value of the invoices, minus a small percentage. Then, after
you receive payment from your customers, you repay the loan, plus an agreed upon fee to
cover the cost, interest, and risk (usually 1-3% of the total invoice value).

Invoice discounting vs. factoring

As you can see, invoice factoring and invoice discounting are both a means of gaining an
advance against unpaid invoices. However, there are a couple of important differences to note
when it comes to invoice discounting vs. factoring. Whereas invoice discounting is a loan
secured against your outstanding invoices, invoice factoring companies actually purchase the
unpaid invoices outright. This is an important difference because it provides factoring
companies with credit control, which enables them to deal with customers directly. Although this
means that you don’t need to worry about chasing up late payers, it could lead to negative
perceptions of your business if the factoring company takes drastic measures.

It’s also worth noting that invoice factoring may be non-recourse, meaning that if you sell the
invoice to the factoring company and the customer subsequently refuses to pay, you won’t be
obligated to repay the money yourself. Invoice discounting is a loan, rather than a sale, which
means that the money must always be repaid, and therefore non-recourse invoice discounting is
relatively uncommon. Furthermore, unlike invoice discounting companies, factoring companies
will run credit checks on your customers before agreeing to purchase your invoices. This can
help you identify and discard bad payers, which should improve your ability to collect on your
invoices in the future.

Choosing the right invoice finance method for your business

Generally speaking, invoice discounting is a riskier proposition for lenders than factoring. As a
result, invoice discounting is mostly used by big companies with a steady and reliable customer
base. By contrast, invoice factoring tends to be used by smaller companies due to its
accessibility, rather than choice. Ultimately, the best invoice financing for small business
solution depends on the needs and circumstances of your company.
What Is an Overdraft?

An overdraft is an extension of credit from a lending institution that is granted when an account

reaches zero. The overdraft allows the account holder to continue withdrawing money even
when the account has no funds in it or has insufficient funds to cover the amount of the
withdrawal.

Basically, an overdraft means that the bank allows customers to borrow a set amount of money.
There is interest on the loan, and there is typically a fee per overdraft. At many banks, an
overdraft fee can run upwards of $35.

Overdraft

How an Overdraft Works

With an overdraft account, a bank is covering payments a customer has made that would
otherwise be rejected, or in the case of actual checks, would bounce and be returned without
payment.

KEY TAKEAWAYS

 Overdraft protection is a loan provided by some banks to customers when their account
reaches zero.

 The overdraft allows the customer to continue paying bills even when there is insufficient
money in the customer's account(s).

 An overdraft is like any other loan, the customer pays interest on the loan and, in the
case of overdrafts, will typically have a one-time insufficient funds fee.

As with any loan, the borrower pays interest on the outstanding balance of an overdraft loan.
Often, the interest on the loan is lower than the interest on credit cards, making the overdraft a
better short-term option in an emergency. In many cases, there are additional fees for using
overdraft protection that reduce the amount available to cover your checks, such as insufficient
funds fees per check or withdrawal.

An Example of Overdraft Protection

Overdraft protection provides the customer with a valuable tool to manage their checking
account. If you're short a few dollars on your rent payment, overdraft protection ensures that
you won't have a check returned against insufficient funds, which would reflect poorly on your
ability to pay. However, banks provide the service because of how they benefit from it—namely,
by charging a fee. As such, customers should be sure to use the overdraft protection sparingly
and only in an emergency.

The dollar amount of overdraft protection varies by account and by the bank. There are pros
and cons to using overdraft protection. Often, the customer needs to request the addition of
overdraft protection. If the overdraft protection is used excessively, the financial institution can
remove the protection from the account.

Special Considerations

Your bank can opt to use its own funds to cover your overdraft. Another option is to link the
overdraft to a credit card. If the bank uses its own funds to cover your overdraft, it typically won't
affect your credit score. When a credit card is used for the overdraft protection, it's possible that
you can increase your debt to the point where it could affect your credit score. However, this
won't show up as a problem with overdrafts on your checking accounts.

If you don't pay your overdrafts back in a predetermined amount of time, your bank can turn
over your account to a collection agency. This collection action can affect your credit score and
get reported to the three main credit agencies: Equifax, Experian, and TransUnion. It depends
on how the account is reported to the agencies as to whether it shows up as a problem with an
overdraft on a checking account.

Frequently Asked Questions

What is overdraft?

Overdraft is a loan provided by a bank that allows a customer to pay for bills and other
expenses when the account reaches zero. For a fee, the bank provides a loan to the client in
the event of an unexpected charge or insufficient account balance. Typically these accounts will
charge a one-time funds fee and interest on the outstanding balance .

How does overdraft work?

Under overdraft protection, if a client’s checking account enters a negative balance, they will be
able to access a predetermined loan provided by the bank, and are charged a fee. In many
cases overdraft protection is used to prevent a check from bouncing, and the embarrassment
that this may cause. Additionally, it may prevent a non-sufficient fund fee, but in many cases
each will type of fee will charge roughly the same amount.

What are the pros and cons of overdraft?

While the pros of overdraft involve providing temporary emergency funds when an account
unexpectedly has insufficient funds, it's important to weigh the costs. Overdraft protection often
comes with a significant fee and interest, that if not paid off in a timely manner, can add an
additional burden to the account holder. According to the Consumer Financial Protection
Bureau, customers who had overprotection, in fact, paid more in fees than those without
overdraft protection. 
Goodwill

What Is Goodwill?

Goodwill is an intangible asset that is associated with the purchase of one company by another.
Specifically, goodwill is the portion of the purchase price that is higher than the sum of the net
fair value of all of the assets purchased in the acquisition and the liabilities assumed in the
process. The value of a company’s brand name, solid customer base, good customer relations,
good employee relations, and proprietary technology represent some reasons why goodwill
exists.

KEY TAKEAWAYS

 Goodwill is an intangible asset that accounts for the excess purchase price of another
company.

 Items included in goodwill are proprietary or intellectual property and brand recognition,
which are not easily quantifiable.

 Goodwill is calculated by taking the purchase price of a company and subtracting the
difference between the fair market value of the assets and liabilities.

 Companies are required to review the value of goodwill on their financial statements at

least once a year and record any impairments. Goodwill is different from most other
intangible assets, having an indefinite life, while most other intangible assets have a
finite useful life.
What is Asset Financing?

Asset financing is a type of borrowing related to the assets of a company. In asset

financing, the company uses its existing inventory, accounts receivable, or short-term
investments to secure short-term financing.

There are two ways to finance assets:

The first involves companies using financing to secure the use of assets, including
equipment, machinery, property, and other capital assets. A company will be entitled
to full use of the asset over a set period of time and will make regular payments to the
lender for the use of the asset.

The second variation of asset financing is used when a company looks to secure a loan
by pledging the assets they own as collateral. With a traditional loan, funding is given
out based on the creditworthiness of a company and the prospects of its business and
projects.

Loans given out through asset financing are determined by the value of the assets
themselves. It can be an effective alternative when a company is not qualified to secure
traditional financing.

Summary

 Asset financing is used in two ways: to secure the use of assets and to
secure funding from a loan.
 Both provide financial flexibility for a company by increasing short-
term funding and working capital.
 More companies can qualify for asset financing compared to traditional
financing since the assets are used as collateral.

Why Use Asset Financing?

1. Securing the use of assets

The capital expenditures for purchasing assets outright can put a strain on a
company’s working capital and cash flow. Using asset financing provides a company
with the assets they need to operate and grow while maintaining financial flexibility
to allocate funds elsewhere.

Purchasing assets outright can be expensive, risky, and hold a company back from
expansion. Asset financing provides a viable option to acquire the assets the
business needs without excessive expenditures.

With asset financing, both the lenders (banks and financial institutions) and the
borrowers (businesses) benefit from the structure. Asset financing is safer for
lenders than lending a traditional loan.

A traditional loan requires the lending of a large sum of funds that a bank hopes
they will get back. When the bank lends assets out, they know they will be able to at
least recover the value of the asset’s worth. In addition, if borrowers fail to make
payments, the assets can be seized by the lender.

2. Securing a loan through assets

Asset financing also involves a business looking to secure a loan by using the assets
from their balance sheet pledged as collateral. Companies will use asset financing
in place of traditional financing because the lending is determined by the value of
the assets rather than the creditworthiness of a company.

If the company were to default on their loans, their assets would be seized. Assets
pledged against such loans can include PP&E (Property,  Plant, and Equipment
(PP&E) is a non-current, tangible capital asset shown on the  balance sheet  of a
business and is used to generate revenues and profits.   PP&E plays a key part in
the financial planning and analysis of a company’s operations and future
expenditures, especially with regards to capital expenditures.), inventory,
accounts receivable, and short-term investments.

Early-stage and smaller companies often run into an issue with lenders because
they lack the credit rating or track record to secure a traditional loan. Through asset
financing, they can receive a loan based on the assets they need to secure financing
for their day-to-day operations and growth.
It is commonly used for short-term funding needs to increase short-term cash and
working capital. The funds will be put towards a number of items, such as
employee wages, payments to suppliers, and other short-term needs.

The loans are typically easier and faster to obtain, which makes them attractive to
all companies. With fewer covenants and restraints, they are more flexible to use.
The loans are usually accompanied by a fixed interest rate, which helps the
company with managing its budgets and cash flow.

1. Hire Purchase

In hire purchase, the lender purchases the asset on behalf of the borrower. The
borrower will make payments to the lender to pay off the asset over time. At such
time, the asset is owned by the lender until the loan is paid off. Once the final
payment is made, the borrower will be given the option to purchase the asset at a
nominal rate.

Hire purchase is an arrangement for buying expensive consumer goods, where the
buyer makes an initial down payment and pays the balance plus interest in installments.
The term hire purchase is commonly used in the United Kingdom and it's more
commonly known as an installment plan in the United States. However, there can be a
difference between the two: With some installment plans, the buyer gets the ownership
rights as soon as the contract is signed with the seller. With hire purchase agreements,
the ownership of the merchandise is not officially transferred to the buyer until all the
payments have been made.
How Hire Purchase Agreements Work
Hire purchase agreements are similar to rent-to-own transactions that give the lessee
the option to buy at any time during the agreement, such as rent-to-own cars. Like rent-
to-own, hire purchase can benefit consumers with poor credit by spreading the cost of
expensive items that they would otherwise not be able to afford over an extended time
period. It's not the same as an extension of credit, though, because the purchaser
technically doesn't own the item until all of the payments are made.

Because ownership is not transferred until the end of the agreement, hire purchase
plans offer more protection to the vendor than other sales or leasing methods for
unsecured items. That's because the items can be repossessed more easily should the
buyer be unable to keep up with the repayments.

Advantages of Hire Purchase Agreements

Like leasing, hire purchase agreements allow companies with inefficient working
capital to deploy assets. It can also be more tax efficient than standard loans because
the payments are booked as expenses—though any savings will be offset by any tax
benefits from depreciation.

Businesses that require expensive machinery—such as construction, manufacturing,

plant hire, printing, road freight, transport and engineering—may use hire purchase
agreements, as could startups that have little collateral to establish lines of credit.

A hire purchase agreement can flatter a company's return on capital employed (ROCE)

and return on assets (ROA). This is because the company doesn't need to use as much
debt to pay for assets.

 
Using hire purchase agreements as a type of off-balance-sheet financing is highly
discouraged and not in alignment with Generally Accepted Accounting Principles
(GAAP).
Disadvantages of Hire Purchase Agreements
Hire purchase agreements usually prove to be more expensive in the long run than
making a full payment on an asset purchase. That's because they can have much
higher interest costs. For businesses, they can also mean more administrative
complexity.

In addition, hire purchase and installment systems may tempt individuals and
companies to buy goods that are beyond their means. They may also end up paying a
very high interest rate, which does not have to be explicitly stated.

Rent-to-own arrangements are also exempt from the Truth in Lending Act because they

are seen as rental agreements instead of an extension of credit.
Hire purchase buyers can return the goods, rendering the original agreement void as
long as they have made the required minimum payments. However, purchasers suffer a
huge loss on returned or repossessed goods, because they lose the amount they have
paid towards the purchase up to that point.

2. Equipment Lease

Equipment leases are popular options for asset financing because of the freedom
and flexibility it comes with. For an equipment lease, the business (borrower) will
enter a contractual agreement with a lender to use the equipment for its business
for an agreed-upon period of time.

Payments are made by the business until the contractual period ends. Once the
lease is up, the business can either return the rented equipment, extend its lease,
upgrade to the latest equipment, or buy the equipment outright.

3. Operating Lease

An operating lease is similar to an equipment lease, except equipment leases are

usually for short terms, and operating leases are typically longer but not for the full
life of an asset. As a result, operating leases are often a cheaper option since the
asset is being borrowed for a shorter amount of time.

Payments are only reflected for the time the asset is used and not for the asset’s
full value. Operating leases are beneficial to businesses looking for short to
medium-term use of equipment to fulfill their needs.

4. Finance Lease

The defining feature of the finance lease is that all rights and obligations of
ownership are taken on by the borrower for the duration of the lease. The
borrower holds responsibility for the maintenance of the asset during the life of the
lease.

5. Asset Refinance

Asset refinance is used when a business wants to secure a loan by pledging the
assets they currently own as collateral. Assets, including property, vehicles,
equipment, and even accounts receivables, are used to qualify for borrowing.
Rather than a bank judging the business on its creditworthiness, the bank will value
the pledged assets and create a loan size based on the value of the assets.
Key Takeaways

The two types of asset financing provide flexible options for businesses and their
use of assets. When asset financing is used to obtain the use of assets from a
lender, a company’s cash flow and working capital are less strained.

The other variation of asset financing is used when a company wants to secure a
loan with their assets pledged as collateral. The loans are typically easier to get due
to the loan being granted based on the value of the assets rather than
the creditworthiness of the company.
FALSE ECONOMY
In economics, a false economy is an action that saves money at the beginning but
which, over a longer period of time, results in more money being spent or wasted than
being saved. For example, it may be false economy if a city government decided to
purchase the cheapest automobiles for use by city workers to save money; however, if
cheap automobiles have a record of needing more frequent repairs, the additional repair
costs would eradicate any initial savings.
Motivating factors on the part of the party engaging in a false economy may be linked to
the long-term involvement of this party. For example, a real estate developer who builds
a condominium may turn the finished structure over to the ensuing condominium
corporation which is run by its members once the last unit is sold and the building has
passed a final inspection. Longevity of the components of the structure beyond the final
turnover of the facility may not be a major motivating factor for the developer, meaning
that the result of the application of false economies may be more detrimental to the end
user, as opposed to the developer.
Individuals may also practise false economy in their personal lives. A notable
practitioner of false economy was King Frederick William I of Prussia, who was said
by Thomas Macaulay to have saved five or six reichsthalers a year by feeding his family
unwholesome cabbages even though the poor diet sickened his children and the
resulting medical care cost him many times what he saved. [1]
Some examples of false economies include:

 Purchasing cheaper products that don't last as long or may require more
maintenance than the more expensive alternatives (buying cheap shoes, cheap
paint, cheap automobiles);
 Paying just the minimum amount on a credit card bill each month;
 Purchasing counterfeit consumer goods;
 Choosing to not have your vehicle serviced on time;
 Doing home projects yourself rather than employing a trained professional for the
job.
All these examples save the consumer some amount of money in the short-run,
however could end up costing the consumer more further down the road.
The concept is related to planned obsolescence, whereby the lower initial cost of a
product attracts buyers mostly on the basis of low cost, but who may later be at a
disadvantage if the product becomes obsolete early.
Those in poverty often opt into false economies when they perceive that they can't
afford the better long-term option in the short-term
Bootstrapping as a business strategy
Bootstrapping is a technique used by individuals in business to overcome obstacles,
achieve goals and make improvements through organic, self-sustainable means with no
assistance from outside. It basically means to found or start a business using
personal assets (such as savings, sweat equity, low operating costs, and fast
cash sales turnaround) in the absence of any external financial input and also
maintaining operations without the need for financial support from the outside.

Bootstrapping is undertaken by entrepreneurs in ventures where they know they don’t

have sufficient resources from the outset and that these must be acquired, e.g. finance,
knowledge and business relationships. A bootstrap is an attempt to acquire any of these
with costs involved, financial and non-financial, minus the costs of acquiring funding or
investments to support these resources.

Bootstrapping resources

The main resources every new business needs are threefold and consist of FINANCE,
KNOWLEDGE AND RELATIONSHIPS.

Finance

These are all the tangible, monetary assets relating to business ventures. Some businesses are
more asset intense than others and need quality equipment to launch into the marketplace.

Knowledge

This includes the experience and skills of those driving the venture as well as employees and
any advisors used. Intellectual property counts, together with the skills and experiences that are
gained along the way and the methods by which these are achieved. The knowledge gained
includes areas such as best practice and specific outcomes when targeting customers, the
wider business arena and the product or brand itself. The methods used include policies and
processes that build the business structure and the ways in which efficiency is improved.
Relationships

Relationships in startups cover areas such as business contacts brought in from all those
involved in the business, its presence online and the cohesion, morale and drive of those who
make up the core team. Relationships extend to those with stakeholders, outside bodies
including the press, regulatory authorities and professional memberships. Harnessing (gaining
control of) credibility with third parties is an important area and developing a brand is
essential. Building relationships hinges around securing the most powerful ally of any
business, not just startups, and that is gaining third party trust.

Why is bootstrapping a good idea?

Bootstrapping is vital because it protects equity put into the business by founding members.
Founders may look to secure equity funding when starting a business but this takes its toll on
the interest they hold in the equity and can signal a loss of decision-making powers by creating
outside control that must be obeyed. Businesses need to decide if equity available is needed. If
it is, whether it’s worth the sacrifices.

Innovation is often driven by necessity and bootstrapping creates an element of risk, which can
give rise to innovative thinking and creation, with great efficiency and success. Evidence of
successful bootstrapping in the past is also a good signal to give out to potential future investors
when the time comes to apply for their help, as they will see the hard work already invested in
the business and are likely to trust the business’ commitment when it comes to allocating their
funds wisely.

In some resource-intense business likes print e-commerces, sending out the right message to
future investors, showing the business has the gumption to not only survive but thrive without
outside help at the start will help to attract future outside assistance.

Devising a bootstrapping strategy

Bootstrapping is made up of decisions and opportunities taken to develop a strategic business

plan. Decisions taken cover actions, policies and procedures, as well as a structure to minimise
cost, improve efficiency and deliver objectives within a favourable time frame.
Decisions to put a venture into an improved position to benefit from bootstrapping are known as
bootstrapped decisions and examples are deciding to implement a more streamlined process
and relocating to a new area and/or premises. Bootstrapping is taking advantage of external
elements that can be levered to gain resources without needing to harness and spend valuable
funds. Such opportunities can be large and small, the smaller ones focusing on perhaps just
one of the three resources, such as securing funding, and the larger bootstraps covering all the
three resource areas of finance, knowledge, and business relationships, good examples being
crowdfunding or embarking on strategic business partnerships.

Conditions necessary for bootstrapping

There are four main elements that enable a bootstrapping strategy to go ahead and give it
meaning.

Firstly, startups need concise business cycles from launching to exiting the
bootstrapping arena. This timeframe has shortened in the last decade for several reasons,
such as the opportunities the Internet provides (open source tools, global platforms to target
customers, cloud technology, and other online facilities, like Dropbox, Evernote, Onlineprinters,
etc.). Shorter business cycles demand streamlined processes and require less aggregate
investment. On the other hand, it’s paramount to find and capture timely funding that isn’t
necessarily based on the more common venture capital approach and/or acquiring other
resources.

Secondly, in these lean times, failing and picking yourself up again is often seen as a
way to improve but bootstrapping opportunities must be categorised as both good and
bad. The good are, for example, finding funding sources that have an in-depth knowledge of
your business niche and are a good match in terms of having the same objectives, so leaving
room for the company to grow without preventing future fundraising and decision-making by the
business itself.

Thirdly, when it comes to bootstrapping, investment must include knowledge and

relationships, not just money. The ability to gain resources that aren’t linked to financing,
without using financial capital, is an example of a good bootstrap.

The fourth element of bootstrapping relates to making profits and controlling the
organisation. Wealth-oriented business owners, who can accept smaller profit shares, often
get greater financial rewards than those who try to take total control and go for larger profit
shares.

Additionally, bootstrapping can give business owners the chance to grow their business by
acquiring critical resources while having time to get up to speed, giving them the opportunity to
maintain equity interest and control over decisions. Bootstrapping strategies that reduce the
amount of capital investment that’s needed reduce the time taken for the business to come to
fruition, thereby speeding up when business owners can take their profits.

Developing a bootstrapping strategy

Taking into account the three essential resources that startups need, the different bootstrapping
methods and the current climate in the startup arena, startups should formulate a detailed
bootstrapping strategy to reap the future benefits.

A well-constructed bootstrapping strategy will show the best path to take into the future before
it’s necessary to secure the additional funding that will improve the likelihood of success for a
startup.

Finding, choosing and deciding when to implement the best bootstrapping moves calls for
strategic planning, a wide-view perspective and keeping an ear to the ground for opportunities,
since every startup is unique with constantly changing needs as it grows and develops into the
future.