WASHINGTON, Oct. 10, 2019 /PRNewswire/ -- Small business owners rely heavily on personal savings and income from another job to fund their first year of operations, according to original survey data published by SCORE, mentors to America's small businesses. Notably, 60% of entrepreneurs have enough cash saved to support themselves for at least three months, despite the majority (78%) not seeking, much less obtaining, outside financing.
This original survey data constitutes part two of the Megaphone of Main Street data report on small business startups and focuses on how entrepreneurs find financing during their critical first year.
Key findings from part two of the data report include:
New entrepreneurs started their businesses using personal savings (66.3%) and income from another job (27.6%).
- In their first year of operations, most startups (78%) did not seek, much less obtain, outside financing, instead relying on personal savings or income from another job.
- Within the 22% of startups who did seek funding during their first year, the most successful funding sources were loans from friends and family (77% successful) and loans from banks or other financial institutions (58% successful).
Half of new entrepreneurs are bootstrapping, while the other half are financially prepared.
- 42% of entrepreneurs were bootstrapping, starting out with less than $5,000 in cash reserves.
- However, almost half (49%) began operation with more than $10,000 in the bank;
- A quarter (24%) had more than $50,000.
New entrepreneurs spend outside funds on equipment, inventory and marketing.
- 63% of respondents used the outside funds they received on equipment.
- 48% of respondents used outside funds to purchase initial inventory.
- 41% used outside funds to lease or prepare a business location.
"Surprisingly few startups receive outside funding, forcing the majority of new entrepreneurs to get creative and rely on personal savings and income from other jobs to fund their first year of business," said SCORE CEO Bridget Weston. "SCORE offers an abundance of resources, including mentoring, online articles and workshops, to help entrepreneurs with their financial education so they can make informed decisions about how to successfully launch and grow their businesses."
About The Megaphone of Main Street
This report constitutes the fourth edition of SCORE's Megaphone of Main Street data report series, which presents original, statistically-significant survey data on the American small business landscape. Survey data was collected from 1,000 new small business owners in all 50 states and Washington, D.C., representing new small businesses of varied sizes in a broad coverage of industries. Other sections of this data report focus on the challenges that new entrepreneurs face in their first year of operations, including finding their niche in the market and hiring the right team.
Since 1964, SCORE has helped more than 11 million aspiring entrepreneurs. Each year, SCORE's 11,000 volunteer business experts provide free small business mentoring sessions, workshops and educational services to clients in 300 chapters nationwide. In 2018, SCORE volunteers helped to create 32,387 new businesses and 103,300 non-owner jobs.
For more information about starting or operating a small business, or on volunteering with SCORE, visit SCORE at www.score.org. Follow @SCOREMentors on Facebook, Instagram and Twitter for the latest small business news and updates.
Funded in part through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, conclusions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.