Study: Startups rely on banks, credit card debt
Bank loans are a far more important source of startup capital than are investments by friends and family members, according to a new report by the Kauffman Foundation.
Researchers surveyed nearly 5,000 businesses founded in 2004. At most of these, 75 percent of the funding used in their first year of operation came from investments by their owners, bank loans and/or credit card debt. This finding highlights how important credit markets are to startups, not just existing businesses, according to the study’s authors.
“There’s a critical role for policy makers right now to ensure that the credit markets start functioning better so that we minimize the negative effect the credit crunch is having on startup businesses,” said Alicia Robb, senior research fellow at the Kauffman Foundation.
“I think many people understand the importance of bank credit for firms that are already up and running -- our results show bank credit is critical at the earliest stages of a firm’s life,” said study co-author David Robinson, professor at Duke University.
Resources for
Start Up Business Credit Cards
