An Empirical Investigation of Bootstrap Financing Among Small Firms

This study examines the use of 27 bootstrap financing methods among a sample of 91 small firms.   Owners' rankings of the importance suggested that bootstrap financing  was not central to their firms 'financing strategy. Owners who had greater difficulty of raising capital ranked bootstrap financing methods that (I) slowed disbursements, (2) generated cash, and (3) subsidized operations as being more important than owners who experienced less difficulty in raising capital. Owners who believed their firms were more  undercapitalized  ranked bootstrap financing methods that (I) slowed disbursements. (2) generated cash, and (3) minimized investment  as being more important  than owners who experienced less difficulty in raising capital. The use of bootstrap financing  was also directly related to the risk of the firm. The results can be used by owners of small firms, consultants, and support agencies that provide assistance to small firms in areas of financial planning and capital acquisition. Understanding the use and availability of all sources of capital will enable owners to obtain a comprehensive understanding of capital alternatives and financial strategies. Agencies that provide support services can use the information to better assist small firms in developing financing strategies. This information could easily be built into training programs for  both new and existing small  businesses

An Empirical Investigation of Bootstrap Financing Among Small Firms

This study examines the use of 27 bootstrap financing methods among a sample of 91 small firms. Owners\u27 rankings of the importance suggested that bootstrap financing was not central to their firms \u27financing strategy. Owners who had greater difficulty of raising capital ranked bootstrap financing methods that (I) slowed disbursements, (2) generated cash, and (3) subsidized operations as being more important than owners who experienced less difficulty in raising capital. Owners who believed their firms were more undercapitalized ranked bootstrap financing methods that (I) slowed disbursements. (2) generated cash, and (3) minimized investment as being more important than owners who experienced less difficulty in raising capital. The use of bootstrap financing was also directly related to the risk of the firm. The results can be used by owners of small firms, consultants, and support agencies that provide assistance to small firms in areas of financial planning and capital acquisition. Understanding the use and availability of all sources of capital will enable owners to obtain a comprehensive understanding of capital alternatives and financial strategies. Agencies that provide support services can use the information to better assist small firms in developing financing strategies. This information could easily be built into training programs for both new and existing small businesses

Working Capital Financing

Howard E. Van Auken is an Assistant Professor of Finance at Iowa State University

The Business Launch Decision: An Empirical Investigation of Reasons for Not Starting a New Business

This article presents the results of a survey that examined the business launch decision. All of the individuals in the study al/ended a workshop on how to evaluate a business idea and launch a new venture. All of the individuals who all ended the workshop were interested in, but decided against, launching a new venture. The results of the study indicate that time constraints, availability of capital, and risk tolerance are perceived as significant obstacles by potential new business owners. Significant differences in the ranking of obstacles were found relative to whether the individuals believed that the obstacles to launch could be overcome, age of the respondent, and whether the individuals had previously owned a business. In addition, individuals who were more highly educated and had previous business ownership were less likely to launch a new business subsequent to the workshop. The results of the study can be used by service providers and consultants who develop training programs that assist individuals in the screening of business ideas and launching of new firms. The results of the study also can be incorporated into college curriculum to provide students with insight into obstacles impacting on business launch

The Business Launch Decision: An Empirical Investigation of Reasons for Not Starting a New Business

This article presents  the results of a survey that examined the business launch decision.  All of the individuals in the study al/ended a workshop on how to evaluate a business idea and launch a new venture. All of the individuals who all ended the workshop were interested in, but decided against, launching a new venture. The results of the study indicate that time constraints, availability of capital, and risk tolerance are perceived as significant obstacles by potential new business owners. Significant differences in the ranking of obstacles were found relative to whether the individuals believed that the obstacles to launch could be overcome, age of the respondent, and whether the individuals had previously owned a business. In addition, individuals who were more highly educated and had previous business ownership were less likely to launch a new business subsequent to the workshop. The results of the study can be used by service providers and consultants who develop training programs that assist individuals in the screening of business ideas and launching of new firms. The results of the study also can be incorporated into college curriculum to provide students with insight into obstacles impacting on business launch

The Familiarity of Small Technology-Based Business Owners with Sources of Capital: Impact of Location and Capitalization

This paper examines issues related to the acquisition of capital by a sample of 142 small technology-based firms. Specifically, the study investigates the relationship between owners of small technology-based firms\u27 familiarity with the alternative sources of capital and (I) location of the business and (2) amount of capital raised by the business. The results show that familiarity with alternative sources of capital is affected by the location of the business and amount of capital raised by the company. The results have several implications affecting small business owners, providers of capital, and policy-makers. First, many small business owners are relatively unfamiliar with many sources of capital that are used to fund growth. Second, owners of small technology-based firms indicate low familiarity with government financing programs. Third, owners of small technology-based firms in smaller communities are less familiar with sources of capital commonly used to finance growth. Fourth, owners of small technology-based firms are relatively unfamiliar with methods of bootstrap financing

Financing Patterns of Minority-Owned Small Business

This study examines the initial, seasonal, and refinancing characteristics of 67 minority business owners. The results are compared to the financial characteristics of women-owned and mixed ownership small firms. Minority-owned firms are found to rely primarily on equity to finance initial operations. Minority business owners' initial debt was commonly obtained through Small Business Administration (SBA)guaranteed loans and government grants. A very large percent of the minority business owners who acquired debt were required to provide numerous supporting documents. The results indicate that minority firms that experienced difficulty in obtaining initial capital continue to experience financial problems relating to operations