Bootstrap financing helps avoid some of the problems of external capital like decreases in flexibility and increased impulse to spend.

Question

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Bootstrap financing refers to using personal savings, credit card debt, or loans from friends and family to start a business rather than seeking external capital from investors or lenders. By using bootstrap financing, the entrepreneur maintains greater control over the business and avoids the potential drawbacks of external capital, such as lower flexibility and pressure to spend the money quickly.

Bootstrap Financing Helps Avoid Some of the Problems of External