Friday, November 07, 2008

New Firms - From Where Do They Obtain Capital?

Jeff Boyce, who sits on the New York SBDC Advisory Board, forwarded a link to a new report found on the Kauffman Foundation website. It's called The Capital Structure: Decisions of New Firms. It's 20 pages long, and was generated by using data from Kauffman's Firm Survey.

From its Abstract:

"This paper investigates the capital structure choices that firms make in their initial year of operations . . . Contrary to many accounts of startup activity, the firms in our data rely heavily on external debt sources as bank financing, and less heavily on friends and family-based funding sources."

Later in the report, "external debt sources" is defined to include local bank financing, as well as that of credit cards.

There's a lot more to the report, but I invite you to read it. As Jeff mentioned in his accompanying email, "This recent Kauffman Foundation report underscores the importance of microloan funds and small business lending operations like NYBDC, combined with SBDC support, as a predictor of new firm success."

Hear, hear. (And thanks, Jeff, for the tip.)

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