$1 bills and coins spread on table top

7 ways limited funds can work in your favor

Years ago, when I started my company, I went to a Small Business Development Center seminar. A local banker discussed financing your new venture. One thing he said stood out to me: “Be sure to borrow everything you will need for at least the first 2 years right up front. Because no banker will want to talk to you for additional credit inside those first 2 years.” 

Wow. That suddenly raised the threshold for starting a new venture. But what he said made sense: If I started a business, borrowed money and then in a year or so went back to the bank to ask for more, of course they’d worry about why I burned through that first round of funds and now needed more, while still within those first few years when a majority of businesses will fail.

It also convinced me that I didn’t want to start out with major debt. I’d seen friends start a business and eventually get out of it, but still be stuck paying off debt from that business for years to come. Didn’t want to be in that boat. 

So I followed the time-honored boot-strapping method: Start with a bare minimum. Reinvest all income possible. Grow as funds and projects allow. In my field you can do that. But it was still a challenge. For the first year or so, I was constantly borrowing and renting equipment to do video shoots. Eventually, one piece at a time, I purchased the equipment I really needed and I owned it outright. If I had a slow month, I didn’t have to worry about making a payment to the bank or them coming to repossess my tools of the trade.

Limited funds can also be a nail-biting experience. Because you’re wondering where money will come from to pay immediate bills, as well as feed expansion of the business.

Even so, for many small business owners and entrepreneurs, I see a real benefit in starting out with limited funds. Looking back, I wouldn’t trade that experience.

Here are 7 ways limited funds can work in your favor

  1. Limited funds can boost creativity. If necessity is the mother of invention, then having limited funds is its father. When you don’t have much money, you have to figure out unique and creative ways to get things done. Lessons learned during this time can become absolutely invaluable as your business grows. You’re investing in your future. H. Jackson Brown, Jr. in Life’s Little Instruction Book, explained, “When starting out, don’t worry about not having enough money. Limited funds are a blessing, not a curse. Nothing encourages creative thinking in quite the same way.”
  2. Limited funds teach you to live without non-essentials. While this may sound harsh and minimalistic, learning to live with only what’s necessary can play in your favor in the long run. Setting up your business frugally makes you “lean and mean.” This translates to being more competitive in the future. You’ll be able to perform services at a lower cost to you than your competition. When you establish your business without those non-essentials, your processes tend to be simpler and easier to perform. With limited funds you’re not so tempted to get side-tracked or distracted by the newest gadget or software.
  3. Limited funds can be a great motivator! Obviously, if you start with limited funds, you don’t want to stay there forever. You’re motivated to get out there and drum up new business. You’re eager. As an ancient Proverb explains, “The appetite of laborers works for them; their hunger drives them on.” Or as Steve Jobs famously said: “Stay hungry!”
  4. Working with less builds character. Having limited funds builds character traits like: humility, perseverance, endurance, self-discipline, contentment, and gratitude. Limited funds can be the catalyst for building toughness into your life that will carry you through other difficult times ahead. That kind of toughness is never born out of an easy existence.
  5. Limited funds help you form critical alliances. Lack of funds generally prompts us to seek the help of others—not necessarily asking for money, but our lack magnifies the importance of strategic relationships. Establishing these relationships, especially in times of need, helps us put down deep roots with key people. The result is long-lasting, meaningful, and strategic alliances that benefit all mutually.
  6. Limited funds open your eyes to other streams of income. When funds are meager, it’s not uncommon to start out focusing on one stream of income, only to discover that a different stream is not only more prosperous, but more enjoyable as well. But without the benefit of those limited funds we might never have considered a different business focus or stream of income.
  7. Limited funds give you a story to tell. There’s nothing more encouraging than a “rags to riches” story. By working with limited funds now, you’re building your own personal story. And that story will serve you well in years to come. As you share your story, others will be able to identify with you. You’ll encourage others, and clients will be drawn to do business with you. In fact, you’ll probably find your story to be a key marketing tool in your future business plan.

If you’re working with limited funds right now, I genuinely hope you don’t have to remain in your present state for long, but that you prosper soon! At the same time, embrace your current financial situation and squeeze all the benefit out of it you can, because it won’t last forever. 

Plus, knowing that you can make it now with limited funds, builds confidence that you can weather slow times that will come in the future.

And without a mountain of debt, you won’t be awake late at night worrying about how to keep the banker at bay.

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