Getting started with a new business can be confusing. What type of business structure do you want? How will you get the licenses and permits you need? When it comes time to pay taxes, will you lose more than you can afford? But by far, the most crucial question you may ponder is how to self-finance your startup.

Why Self Finance a Startup?

Whatever the reason, self-financing a business is a viable option. Perhaps you want to open a sole proprietorship or a partnership with no limited partners to retain more control over the decisions in the business. 

If you’ve saved money or have a bit extra coming in, you can use that income to build your business at your own pace. Even if you have limited funds but have extra time, you can often start a service-based business like photography, writing, financial consulting, or offering to speak for engagements.

In the beginning, it can be nice to take your time as you consider your options before growing. Because businesses don’t generally make much money initially, starting up with your own funds means you don’t have the added pressure of quickly becoming profitable. 

According to Inc.com, “Self-funding is the number one form of financing used by most entrepreneurs to start a business, and for good reason. Bootstrapping allows you to test a business idea with little or no external risk. Self-financing means you can chart your own course and don’t have to answer to partners, investors, or lenders.”

Start Small

Everyone wants their business to make money. However, the first step to starting any business is organizing your business plan. Looking at everything from location to employees to tax write-offs can make your head spin, but not getting organized and making a plan can cause problems down the road. 

Before deciding if you can self-finance your business, you need to ask critical questions and honestly answer them. First look at any:

  • Investment requirements for licensing, taxes, incorporation, business needs, etc.  Estimate your daily expenses for the first month you are in business. If you’ve already been operating, make projections based on your costs so far.
  • Projections about your income in the first weeks of your business. Do market research to understand how much you may make per day. If you’ve already begun working, it is easier to look at past reports. Make realistic cash flow projections based on how you’ve grown so far.
  • Balance sheets with projected income expected after assuming necessary expenses.
  • Break-even analysis: Find out how much you will need to make to equal what you need to spend in the first month of business. 
  • Financial data from businesses around you in your community. Consider how much they make and how the information could transfer to your own plans.
  • What you’re likely to need money for and what you can wait to purchase. You might be able to wait on buying a business vehicle or renting a location. Small savings can add up and help your new business succeed. Consider what you absolutely must have to get up and running. Don’t plan to spend on extras.
  • Areas where you feel unsure. Talk through possibilities with your attorney, a small business volunteer, or a mentor. 

According to the SBTDC, most small business owners suggest searching “close to home” for funds during the early stages of your company. The vast majority of Inc. 500 companies used:

  • Personal savings
  • Loans from friends and relatives
  • Consumer loans from banks or mortgage companies 
  • 19 percent relied on commercial bank loans
  • Only 2 percent received money from venture capital firms

Find the Funds Beyond Yourself

If you’ve done your research, looked at financial data and considered your break-even analysis, you may find that you need more than your own money to get started. Try looking at these possibilities: 

  • Bank loans: Most banks require you to personally guarantee any loans you take out to start a business. Make smart decisions that reflect good business analysis early on to qualify for a bank loan later. If you’ve been in business for a time operating successfully, banks will likely give you better loans, including low-interest-rate offerings. The U.S. Small Business Administration (SBA) Loan Guaranty Program works through local banks to finance fair loans. 
  • Non-Bank Lenders 
  • Community Development Credit Unions (CDCUs) 
  • Community Development Corporations (CDCs)
  • Veteran Direct Loan Program 
  • North Carolina Minority Support Center
  • Federal, state and local government contracts 
  • Asset-Based Lenders
  • Purchase order Financing
  • Credit Unions
  • Federal research and development funding
  • Offer limited partnerships: if you developed your business as a partnership, you could add limited partners as investors in your business. They invest for a chance to profit as you grow.
  • Equity capital investment: funds paid into your business in exchange for stock

Watch Out for Debt

Poor planning can leave you relying on your credit cards or siphoning through your personal savings too quickly. To start your business the best way, avoid spending carelessly or buying on credit. Stress about high-interest rate debt can cloud your focus on day-to-day business activities. Credit issues can prevent you from getting the capital you need to grow. 

The majority of businesses that fail, succumb to poor planning and reckless spending. Not preparing a well-thought-out business plan can contribute to failure. 

However, working with experienced advisors to determine your goals and make realistic plans for the future can help you avoid overspending or glossing over important details. Clear-headed thinking with trusted and knowledgeable advisors can help you make these important early financing decisions.

We Can Help

At Hill Law, we are here to walk with you through the early stages of decision-making for your new business. Our experienced attorneys specialize in business startup issues and financial planning to finance your endeavor. Whether you’re considering the next steps or need help with business structure, tax considerations, or applying for capital needs, we’ve got you covered. Contact us and find out how we can help your business grow. 



  1. Start a Business | NC SBTDC 
  2. BUSINESS START-Up guide