- 13 May
14% Of New Startups Use Their Own Cash Or Family Money To Fund Their Business
It might well be the cheapest form of funding - to use your own cash or family money, but 14% of the startups that we interviewed said that they used either their own money or family money to fund their new business initially. It is probably a good way to keep costs down, assuming your family are not charging you to borrow the money!
However, you also have to factor in the loss of any return on the money that you were earning whilst it was invested. The other issue of course is that once you have spent that money it's gone - you may not find it so easy to borrow more money once your business is in trouble and your investment has been used up. There could be some wisdom in making the business fund itself through either overdraft, bank loan or alternative forms of start-up finance such as invoice finance rather than risking your own funds.
Either way, if only 14% of start up businesses used their own/family money it suggests that normally an alternative source of finance is going to be needed. I will publish more soon about the other funding options that start-up businesses say they use.