Bootstrapping: Definition, Method, Techniques & Example

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

Coming up next: Bottom Line in Business: Definition & Concept

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
 Replay
Your next lesson will play in 10 seconds
  • 0:03 Definition of Bootstrapping
  • 0:45 Bootstrapping Methods…
  • 2:48 Lesson Summary
Save Save Save

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Log in or Sign up

Timeline
Autoplay
Autoplay
Speed Speed
Lesson Transcript
Instructor: Kimberly Winston

Kimberly has a MBA in Logistics & Supply Chain Management

Entrepreneurs are often forced to seek creative methods of funding their start-ups. In this lesson, you will learn about a financing option called bootstrapping and how it is used.

Definition of Bootstrapping

William wanted to start a small business but had limited resources. After careful consideration, he decided that bootstrapping was his best option for starting a business. Bootstrapping is the utilization of limited resources to grow or start a business. It entails finding ways to efficiently utilize limited resources to lessen the impact of not having access to formal external resources. Often, small business owners are unable to obtain financing from formal sources, such as bank financing. Small business owners are forced to utilize the resources that they have to finance their business. Bootstrapping is referred to as an informal or creative source of financing a business.

Bootstrapping Methods & Techniques

There are two basic methods of bootstrapping that are interrelated:

  • Efficiently utilizing the resources you have
  • Acquiring new resources

They are interrelated because each method helps to achieve the other method. Efficiently utilizing resources may assist in acquiring new resources, and the reverse is true.

William knew that there were many different techniques for creatively financing his business through the use of bootstrapping. He needed to use bootstrapping techniques that would help him to both efficiently utilize the resources that he had and acquire new resources. He compiled a list of friends and family who might be interested in giving him a personal loan to start his business. He also considered the benefits of trading goods or services and bartering as a way to lease equipment that a friend of his family owned. Leasing equipment instead of buying, he knew, was a form of bootstrapping. Other techniques that he considered were using credit cards to purchase necessary goods, getting a home equity loan, the sale of real estate, and borrowing money from a 401K or an insurance policy.

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create an account
Support