You’ve got a new business idea ready to go, so you’re considering whether to use your personal savings. Self-financing is not a decision to take lightly, and it can have both upsides and downsides.

Before you decide, it’ll be helpful to know all of the information on arguments for or against the funding option. If you understand each side of the coin, you’ll make a decision you won’t regret.

This guide discusses the advantages and disadvantages of personal savings in business funding.


  • Ease
  • Control
  • Profits
  • Management 


  • Limitations
  • Risks
  • Sole responsibility
  • Credit

Advantages and disadvantages of personal savings in business:



One of the first things to consider with personal savings is how easy it is to use. The money is already yours, so you don’t have to spend time searching for it.

In business, time is money because you can spend those valuable minutes to make the best use of that capital. 

But it’s not just simple for starting a business, your own money also makes leaving it easier. You might decide to walk away from it in the future, which is difficult to do if you have loans and competing investors that require negotiations.


The primary reason that entrepreneurs don’t like to seek investment from external sources is out of fear they’ll lose control. Your business is yours, and the only way to guarantee it stays that way is if you don’t answer to anyone.

You can decide whether it grows or doesn’t grow if a smaller business suits your lifestyle better.

A lender will seek their money back and pressure you to prioritise that, and investors may have their own ideas for direction. Those might not align with your ambitions for the business.


Profit is another primary consideration for the advantages or disadvantages of personal savings in business funding. You’re likely to gain financially from the business, so do you want to share that?

The interest and repayments the bank will want after it gives you a small business loan will come from the money your business earns. Any angel investors who provide you with cash will expect a stake in your company.

If you have other shareholders, you must share the profits, which means less for yourself. You’ll need to pay them dividends, which is a percentage of the company’s earnings.


Motivation is essential when it comes to business, and if you have the right level of it, you’ll be more likely to succeed. If you invest your own savings, then it’s money you’ve worked hard to get.

If it’s your money, you are attached to it, so you might manage it better than if you get it from somewhere else. You’ll be less likely to participate in excessive spending and be more frugal with your cash.

One way to help you manage your finances is to use a specific tool to make it easier. Countingup is a business account with built-in accounting software made to do just that.

Its expense categorisation feature can sort all of your costs automatically, so you can see exactly where your savings go.



When you look at the advantages and disadvantages of personal savings for your funding, it’s important to remember the purpose. You either aim to start a new business or grow your existing one.

If you use your own money, you are limited to what you can afford to give. That might mean you hit a cap on the resources you have available.

You could miss out on growth opportunities with a restricted wallet to draw cash. 

For example, a new marketing channel could emerge that could improve your business’ reach. The funds you have could fall short of what you need to take advantage of that, then others adopt and overcrowd it.


A disadvantage if you use personal savings is the level of risk that it could pose for you. You should only invest personal savings you can afford, but circumstances can change quickly in your life.

For example, you could invest savings into your business. At the same time, you continue to work another job to support your family. The company you work for could unexpectedly go under, which means you lose that security.

Suddenly, the funds you invested into the business are spent, meaning you can’t use them to pay for home living costs. That could put a strain on your personal life, lead to arguments and affect your relationships with those closest to you.


Another disadvantage to consider in terms of using your savings for funding is the reliance on your own skills, experience and knowledge. You may only be able to take your business so far with your limited abilities.

Angel investors often choose to invest in industries they know well. That could mean they could offer you helpful guidance and connections to further your business.

For example, an investor may help secure a deal for manufacturing your product that you can’t get without them. When it’s just your company, you’re the only person who will work to make it successful.


One of the most unexpected things to consider when you weigh up the advantages and disadvantages of personal savings in business, is credit. 

If your business can take out loans and pay them back, it’ll build up its credit score. That might be valuable in the future to borrow more money for further expansion that you may not secure with a low one.

For example, after you pay off a small business loan, you might get a better rate on a mortgage. Your business will be able to buy a property it needs, so good credit could have a long-term use.

Take care of your finances with Countingup

If you use your savings or find the money from other sources, you still need to make the most out of what you have. That means you need to consider your financial management.

Countingup is a business account with built-in accounting software that can help you manage your funds through your phone. With its cash flow insight feature, you’ll keep in the loop about the money that comes in and goes out.

Get started for free.