CeoSizeUp

Compared to other sources of funding, using personal savings give the business owner maximum amount of freedom and flexibility. This is often the only option for professionals who wish to start a business, but have no family backing and do not wish to borrow from friends.

A business owner using his/her personal savings is likely to be older and have some experience in handling business related issues. Since personal finances are at stake, decisions will be taken after a careful consideration of all the factors involved. The business owner is usually frugal and keeps a tight control on the finances. There is a lot of freedom in operation of the business.

Since entry level salaries in most industries are low, for a person to have sufficient savings for starting a business takes a lot of time, usually several years. A twenty five year old usually is more focussed and can afford to take more risks than a much older person, as he can always get a job in case of failure.

Though there is a lot of hype in the media about funding from venture capitalists, angel investors, and banks which offer loans to startups, most businesses have to find their own sources of funding either from family, friends or personal savings. Unlike conventional methods of funding, the business is able to focus on making money instead of spending time giving Powerpoint presentations to lenders and investors.

The immediate family of the business founder is the main source of funding, especially in business families. This is often the best source of funding, since family members are supportive and there will be few preconditions . The founder retains control of the business, and usually has the flexibility to take the decisions without consulting others. However, if the business does not do well, it could result in strained relations.

Friends are another source of funding for a business startup - as lenders or investors. However, there may be certain preconditions for funding and the business owner may have to consult the investor / lender before taking any business decision. If the money is not returned, it could mean the end of the friendship.

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