Question of the Day: What source of funding is used most often to start new businesses?
Can you guess how most entrepreneurs are paying when they start their new business?
Answer: 83% of businesses use personal or family savings to get started
- Why do you think such a high percentage of businesses use personal or family savings as their primary source of funding? How might this affect the type and size of businesses that can be launched?
- How might a lack of savings for low-income and other marginalized groups hinder diversity and representation in the business world?
- How might early exposure to entrepreneurship and financial education influence an individual's willingness and/or ability to save and start a business?
Behind the Numbers (altLINE):
"When considering startup capital, there are two main categories of funding new businesses use: equity and debt. According to the SBA, 3 in 4 new businesses use personal savings; roughly 1 in 5 use a bank loan (19%).
Other sources of startup income in both categories include a loan from family or friends, venture capital funding, or leveraging earnings from an existing business.
Sources like federal grants have also become more popular in the wake of the COVID-19 pandemic, and support for small businesses is on the rise. In 2021, for instance, the Biden administration awarded $154.2 billion in federal contract dollars to small businesses, up $8 billion from the previous year."