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Funding Self-Employment: The Role of Consumer Credit

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  • Christoph Kneiding
  • Alexander S. Kritikos

Abstract

This paper investigates whether self-employed households use consumer loans - in particular instalment loans and overdrafts - to finance business activities. Controlling for financial and non-financial household variables we show that self-employed households particularly use personal overdrafts significantly more often than employee households. When analyzing the correlation between consumer loan takeups and consumption of self-employed in comparison to employee households, we find first evidence that overdrafts are used by self-employed to finance their business as well. This indicates that intermingling constitutes a financing strategy when regular business loans might not be accessible.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.390690.de/dp1179.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1179.

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Length: 23 p.
Date of creation: 2011
Date of revision:
Handle: RePEc:diw:diwwpp:dp1179

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Keywords: Small Business Finance; Consumer Credit; Financial Intermingling;

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References

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Cited by:
  1. Kritikos, Alexander S. & Kneiding, Christoph & Germelmann, Claas Christian, 2009. "Demand Side Analysis of Microlending Markets in Germany," IZA Discussion Papers 4292, Institute for the Study of Labor (IZA).
  2. Åstebro, Thomas & Chen, Jing, 2014. "The entrepreneurial earnings puzzle: Mismeasurement or real?," Journal of Business Venturing, Elsevier, vol. 29(1), pages 88-105.

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