Startups

Report Reveals Where Bootstrappers Are Finding the Cash to Start Their Firms

  • 4 min Read
  • October 24, 2019

Author

Escalon

Table of Contents

When it comes to starting a small business, one key consideration is always cash – you need it to scale, produce products, find sales outlets and discover new customers. A variety of fundraising techniques exist, from venture capital to bootstrapping – and if you’re wondering how other entrepreneurs are funding their firms, a new report has some answers.

SCORE recently surveyed about 1,000 small businesses to determine exactly which challenges these entrepreneurs are facing, and published the results in its Megaphone of Main Street report. Escalon scoured through the report to find out some of the most essential funding facts relevant to our readers. Read on for the scoop.

1. Nearly 80 Percent of Entrepreneurs Are Bootstrapping

We all know the pros and cons of bootstrapping a business, and most startups seem to agree that the pros outweigh the cons because even entrepreneurs with very little cash in the bank appear to be leaning into bootstrapping.

According to the SCORE report, about 78 percent of businesses did not seek or obtain outside financing, and about 42 percent of entrepreneurs are starting their ventures with under $5,000 in cash reserves. Almost a quarter of the surveyed businesses started their ventures with over $50,000 available, while the majority of firms had over $10,000 in the bank.

2. Here’s How Bootstrappers Are Funding Their Businesses

With nearly 80 percent of firms noting that they didn’t seek outside financing, the question arises about how these companies were able to fund their businesses. According to the survey, the cash came from two main sources, as follows:

  • Personal Funds: 66.3 percent
  • Income From Another Job: 27.6 percent

Of course, depending on how much money you have in the bank, bootstrapping can be untenable, especially if you’re in an industry where a higher outlay of cash is required in the early stage of your firm.

“Some businesses, such as restaurants or manufacturing, can have large startup costs for real estate and equipment purchases that necessitate larger savings accounts, while other types of businesses, such as personal services, can be operated out of an entrepreneur’s home, and require little startup funds beyond what the owner needs to pay personal bills,” the report said.

3. Less Than Four Percent of Startups Have Outside Investors

Of the companies that went beyond bootstrapping to fund their businesses, the following represents the source of their funding:

  • Borrowing From Friends/Family: 11.3 percent
  • Bank Loan: 11.2 percent
  • Credit Card Cash Advances: 9.0 percent
  • Donations From Friends/Family: 6.4 percent
  • Investors: 3.4 percent
  • Grants: 2.1 percent
  • Crowdfunding: 1.7 percent

Raising money can help those with lower personal savings prepare for the early days of launching, since it’s important to have some reserves if the business is slower to pick up, or to pay for unexpected costs. “Typically, mentors recommend that entrepreneurs have at least three to six months of cash reserves when starting any business.”

4. Highest Rate of Funding Success Seen Via Loans From Friends/Family

Although most startup entrepreneurs bootstrapped their businesses with their own cash reserves, the companies that did seek outside funding had varying degrees of success rates in raising cash that way.

“Of those who did pursue outside financing sources, the highest percentage of success was seen among loans from friends and family, followed by bank loans,” the report notes. About 77.3 percent of businesses that sought financing from friends and family were successful in bringing in cash, while about 58 percent who sought bank loans were able to obtain them, SCORE notes.

5. Here’s Where the Cash Goes

Among the businesses that scored outside financing, they used the funds for the following purposes, according to SCORE (respondents were asked to check all that apply):

  • Purchasing equipment: 63.2 percent
  • Buying inventory: 48.1 percent
  • Marketing: 48.1 percent
  • Leasing/preparing business location: 40.6 percent
  • Product development: 27.4 percent
  • Hiring staff: 25.5 percent
  • Paying the entrepreneur’s own salary: 23.6 percent
  • Other (licenses, operating expenses, etc.): 11 percent

Entrepreneurs can use the SCORE report to get a handle on how other startups are finding funding. Click here to read the entire report.

Talk to our team today to learn how Escalon can help take your company to the next level.

  • Expertise you can trust

    Our team is made up of seasoned professionals who bring years of industry experience to the table. You gain a trusted advisor who understands your business inside out.

  • Quality and consistency

    Say goodbye to the hassles of hiring, training and managing in-house finance teams. You will never have to worry about unexpected leave of absence or retraining new employees.

  • Scalability and Flexibility

    Whether you’re a small business or a global powerhouse, our solutions scale with your needs. We eliminate inefficiencies, reduce costs and help you focus on growing your business.

Contact Us Today!

Tap into the latest insights from experts in your industry

uncategorized

How to Reduce Overhead Costs Without Impacting Productivity 

Overhead costs—from utilities and rent to administrative staffing—can quietly swell until they erode profit margins and slow your ability to...

Read More
Accounting & Finance

How to Structure Your Finance Team as Your Business Scales

Growth triggers a tidal wave of financial complexity, multi-entity operations, new product lines, overseas expansion, or investor relations. If your...

Read More
Accounting & Finance

M&A Readiness: How to Prepare Your Financials for a Successful Acquisition or Sale 

Mergers and acquisitions (M&A) can dramatically alter a company’s trajectory—unlocking new markets, technologies, or customer bases. Yet, many deals stumble...

Read More
Accounting & Finance

Optimizing Working Capital: Strategies to Maximize Liquidity Without Raising Funds 

Working capital: The difference between your current assets and your current liabilities. It’s a key barometer of financial health.  While...

Read More
Accounting & Finance

Outsourcing vs. In-House: A Strategic Guide for Growing Companies

Expanding your team and capabilities is critical to sustaining growth—but the question often arises: Should you build an in-house department...

Read More
Accounting & Finance

The CFO’s Role in Driving Operational Efficiency in a Mid-Sized Company 

A Chief Financial Officer (CFO) isn’t just a numbers person anymore. Modern CFOs play a pivotal role in shaping strategy,...

Read More
Technology & Security

What Every $10M+ Business Should Know About Data Privacy Laws 

Once your annual revenue surpasses $10 million, you attract more attention from regulators, partners, and customers, especially regarding data privacy....

Read More
People Management & HR

The Cost of a Bad Hire: How to Improve Your Recruiting Process

Hiring is one of the most pivotal processes in any organization, particularly for a medium-sized business looking to scale. Yet...

Read More
People Management & HR

Key Insights from the 2025 CBIZ Not-for-Profit Pulse Survey 

At Escalon, we are committed to keeping our clients informed about the latest trends, challenges, and opportunities across the industries...

Read More