Glencoe Entrepreneurship Finance Practice Exam

Operating as frugally as possible and cutting all unnecessary expenses is bootstrapping. This approach means building and growing a business using internal resources—such as personal funds and reinvested profits—while maintaining a lean operation and avoiding or minimizing external financing. It emphasizes cost discipline, resourcefulness, and staying within means rather than chasing growth through outside investors or borrowed money.

Equity capital, by contrast, involves raising funds by selling ownership stakes in the company, which brings in external money but dilutes control. A line of credit is a borrowing arrangement that provides access to funds up to a limit, representing debt financing. Trade credit is a form of supplier financing that allows paying for goods later, also a financing aspect but not the lean, self-funded mindset bootstrapping centers on.