John L. Herman Jr., in his Herman School of Business, gives us these perils connected to the various forms of bootstrap financing a business:

• Keeping your day job. Working a full-time job and playing the role of part-time entrepreneur means sacrificing sleep and probably convincing family and friends to give you needed help, says Herman. The latter can cost you relationships, he ads, when some people who helped you feel they are entitled to an equal share of the business because they helped. The solution might be to find ways to pay them something or pay them back for their work after things get started.

• Taking out a home equity home. Some bootstrappers might discourage this arguing that the point of bootstrapping is to finance your business without taking such risks and Herman would argue that before betting your home or other important assets you should make sure the possible return is worth it.

• Hit up your local bank for a loan. This is the option most likely to be suggested by an SBA or other business advisor, but as Herman says, these are only usually available to operating businesses with available "hard assets" or collateral connected to the operating business: accounts receivable, existing inventory.


• Dig into your personal savings. Herman takes it for granted this will be necessary and many bootstrappers insist this is the best early option (see the incredible story of entrepreneur Cordia Harrington) because it allows you to control the amount of money you risk.

• Get loans from family and friends. Herman would argue this is a big risk for family relationships since he says family and friends aren't likely to forgive you blowing money on a fail venture and will always resent it. In the past I've tried to borrow only small amounts from family that I can easily pay back whether or not I'm successful simply to pay for expenses I cannot afford all at once.

• Use credit cards. Herman argues the high interest rates are balanced out by the interpersonal hang-ups possible with family financing.

• Get a partner. This, Herman said, is a last resort, presumably because of the dilution of equity in the business and the problems inherent in the personal dynamics involved in partnerships, but this seems contrary to the kind of team building that has become the bedrock of much bootstrapping especially in the IT sector.

In the end, Herman recommends:

And remember, don't even try if you don't have the stomach to look in the mirror and face yourself, knowing that you could lose every dollar you have put into the dream.

For more recommendations on the partime bootstrapping route, my personal preference, see Part-time Bootstrapper: Rules of the road.