Own savings

Own savings are money the owner has already saved and chooses to put into the enterprise. They are an internal source of capital, because the money comes from the owner rather than from an outside lender or investor.

Any owner can use their savings: a sole trader, a partner putting money into a partnership, or a director putting money into a limited company. For example, Priya has £3,000 saved from a Saturday job and uses £1,600 of it to buy a second-hand sewing machine, fabric and a card reader to start selling made-to-measure dance costumes online.

Advantages

Own savings are cheap and quick. No interest or fees are payable, so the owner keeps more of the money the business earns. The money does not have to be repaid as a debt, unlike a loan. There are also no application forms or credit checks, so the cash can be in the business almost immediately.

Disadvantages

The amount available is limited to what the person has saved, so it may not cover everything needed to start up or expand. Using savings can also leave the owner with little or nothing set aside for other events or emergencies, such as a car repair or a sudden bill. If the money is lost, the owner carries the loss personally, which can cause real strain because it was their own money rather than someone else's.