Original text

After a lack of market need for their product or service, and a resulting inability to find customers, the second most common reason for business startups to fail is running out of cash. According to a U.S. banking study, 82% of business failures are due to poor cash management. Securing adequate cash flow to maintain the business and to sustain personal needs was a top concern for startups.

SCORE’s latest infographic examines how entrepreneurs finance operations in their first year of business.

This infographic highlights the findings of part 2 of The Megaphone of Main Street: Startups report.

Startup entrepreneurs rely on personal savings and income for funding.

How much cash did you have in startup funds before starting your business?

• Personal funds: 66.3%
• Income from another job: 27.6%
• Borrow from friends/family: 11.3%
• Bank loan: 11.2%
• Cash advance from credit cards: 9.0%
• Donations from friends/family: 6.4%
• Investors: 3.4%
• Grants: 2.1%
• Crowdfunding: 1.7%

42% of entrepreneurs started with less than $5,000 in cash reserves.
49% started with more than $10,000.
24% started with more than $50,000.

78% did not seek outside financing

% of startups successful in obtaining financing:

• Bank or other financial institution: 8.2%
• Friends / family loan: 4.8%
• SBA loan: 3.1%
• Online lenders: 2.3%
• Angel investors: 1.4%
• Crowdfunding: 0.8%

Only 10% of all entrepreneurs received startup funds of more than $25,000.

Most startups used outside financing for equipment, supplies and marketing.

What did you use your first year outside financing for? (check all that apply)

• Purchasing equipment: 63%
• Purchasing inventory: 48%
• Marketing: 48%
• Leasing and preparing business location: 41%
• Product development: 27%
• Hiring staff: 26%
• Paying my salary/support during startup: 24%
• Other (licenses, operating expenses, etc.): 11%

Whether you’re a startup or an established business, SCORE mentors can help you succeed.