Here’s an interesting question: What do you do when your plan includes financing, and you can’t get the financing?

Normally there are options: investment financing or spending less.

Katie Conrad at Faux Pas is dealing with that problem–the loan is apparently not coming–as she builds her new business, and writing about it as it develops. ‘Chelle Parmele tipped me off to Conrad’s blog, and now I’m interested, rooting for her and waiting to see what happens.

In her latest, titled “Bootstrapping,” she’s contemplating never getting the loan and apparently deciding that she’s going to go for spending less, not investment:

If my loan application is denied, and I’m faced with the dilemma of opening my store with minimal money or not opening it at all, I’ll be bootstrapping–doing what I can when I have the money.

Not knowing her situation in detail, I can’t explain why she doesn’t consider partnering with investors, although maybe that’s what she means when she writes:

I know that I have a couple options–I don’t particularly want to use these options as they come with stricter guidelines and much higher interest rates–and I’ll use them if I have to.

I say “maybe,” because guidelines and interest rates sound like other borrowing options, not investment.

Obviously, there are always tradeoffs with these decisions. Not everybody has the option of investors–it depends on who you are, what you’re doing, what you’ve done and so forth–and some who could get investment don’t want to. I certainly relate to the downside of getting investors.

As with marriage, in which the wrong partners can ruin your life, so too with investors. The wrong partner can ruin your business. That can also ruin your life.

So I don’t know what the problem is, but there are a lot of possible problems, so I let that go for now. If you are in Conrad’s position, you should at least ask yourself whether you can get investors and also, just as important, whether you want to.

Conrad seems to be heading toward the second option, which she calls bootstrapping. To me it’s bootstrapping as well if you get a loan, but that’s semantics. Conrad says:

Bootstrapping brings out the creativity–because what else can you do with little money? You just have to be smart with it! The most important things to me are forming my company and securing the location I’ve already picked out and grown to love. So, those will be first on my list. I have found some used and refurbished equipment on the Internet, and I know I can get started with just a few new things.

It seems like a valid option. If you find yourself in this position, at least take the time to ask yourself whether there is a way to get by with less. Some businesses do in fact really require what the plan says for initial capital because you can’t cut corners. A lot of product businesses, for example, will fail if they don’t get the full capital requirement.

If you only have half as much as you need, make sure you aren’t going to end up losing all that you have because it was only half what you needed. That can happen. That’s why we take the trouble to think it through with a plan.

So, do you just push on ahead, demonstrating your resolve and proving your passion? And if so, does that mean pushing on ahead while seeking financing, resolutely, or does it mean starting the business without the financing? Or do you revise your plan and make do, without the financing?

That’s a question you have to answer for yourself, for your specific case. There’s no one right answer for everybody.

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Tim BerryTim Berry
Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.