From the Wall Street Journal:
Small businesses are turning to angel investors, suppliers and personal credit cards as the financial crisis spreads to Main Street and access to commercial bank loans becomes more restricted.
After being rejected last month at two commercial banks, Education 4 Kids Inc. owner J.M. Ivler is back to financing his 5-year-old online retailer with personal credit cards. “I can’t get the banks to give me a loan,” complains Mr. Ivler, whose Las Vegas company is profitable and produced $350,000 in sales last year.
I have been warning about tightening credit for the past several months. More than ever entrepreneurs will have to rely on their bootstrapping prowess to keep moving forward.
Anyone who did not know this was going to happen has to be blind
I’d question how well Mr. Ivler has been running his business and finances. No matter how bad things get, if your ducks are in a row (profitable business, assets, and good credit) you can get a loan. I’m new to game, but to me 5 years seems a long time in to be “bootstrapping”.
Bootstrapping should never leave the entrepreneur’s bag of tricks. Bootstrapping is achieving your goals with the least amount of resources possible.
1- It helps you weather the storms of economic downturns, industry disruptions, customers falling on hard times, and so forth.
2- It creates more net cash for the entrepreneur to keep as income during good times.
3- It builds more wealth from the business by increasing EBITDA — lower operating costs and smaller overhead equals more cash flow and more value.