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Evidence of Bootstrap Financing among Small Start-Up Firms

Author

Listed:
  • Howard E. Van Auken

    (Iowa State University)

  • Lynn Neeley

    (Northern Illinois University)

Abstract

This study examines the use of bootstrap financing for a sample of 78 firms in a Midwestern state. The results show that traditional sources of capital accounted for 65% of the firms' start-up capital and 35% of the start-up capital was obtained from bootstrap sources. A Chi-squared analysis indicates a significant difference between the percentage of (!) sole proprietorship versus other firms and (2) construction/manufacturing versus other types of firms using bootstrap financing as compared to traditional sources of financing when bootstrap financing comprised at least 60% of the total start-up capital. No significant difference was found between the percentage of firms located in communities less than 10,000 versus greater than 10,000 that used bootstrap financing as compared to the traditional sources of financing.

Suggested Citation

  • Howard E. Van Auken & Lynn Neeley, 1996. "Evidence of Bootstrap Financing among Small Start-Up Firms," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 5(3), pages 235-249, Fall.
  • Handle: RePEc:pep:journl:v:5:y:1996:i:3:p:235-49
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    File URL: http://jefsite.org/RePEc/pep/journl/jef-1996-05-3-d-vanauken.pdf
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    References listed on IDEAS

    as
    1. J. William Petty & William D. Bygrave, 1993. "What Does Finance Have to Say to the Entrepreneur?," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 2(2), pages 125-137, Spring.
    2. Maier, John II & Walker, David A., 1987. "The role of venture capital in financing small business," Journal of Business Venturing, Elsevier, vol. 2(3), pages 207-214.
    3. James S. Ang, 1992. "On the Theory of Finance for Privately Held Firms," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 1(3), pages 185-203, Spring.
    4. Bruno, Albert V. & Tyebjee, Tyzoon T., 1985. "The entrepreneur's search for capital," Journal of Business Venturing, Elsevier, vol. 1(1), pages 61-74.
    5. J. Tobin, 1958. "Liquidity Preference as Behavior Towards Risk," Review of Economic Studies, Oxford University Press, vol. 25(2), pages 65-86.
    6. Jerome S. Osteryoung & Derek Newman, 1993. "What Is a Small Business?," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 2(3), pages 219-231, Summer.
    7. Scott Holmes & Pam Kent, 1991. "An Empirical Analysis of the Financial Structure of Small and Large Australian Manufacturing Enterprises," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 1(2), pages 141-154, Winter.
    8. James S. Ang & James Wuh Lin & Floyd Tyler, 1995. "Evidence on the Lack of Separation between Business and Personal Risks among Small Businesses," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 4(2), pages 197-210, Fall.
    9. Churchill, Neil C. & Lewis, Virginia L., 1986. "Bank lending to new and growing enterprises," Journal of Business Venturing, Elsevier, vol. 1(2), pages 193-206.
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    Citations

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    Cited by:

    1. Edelman, Linda F. & Manolova, Tatiana & Shirokova, Galina & Tsukanova, Tatyana, 2016. "The impact of family support on young entrepreneurs' start-up activities," Journal of Business Venturing, Elsevier, vol. 31(4), pages 428-448.
    2. Julie Ann Elston & Sandy Chen & Alois Weidinger, 2016. "The role of informal capital on new venture formation and growth in China," Small Business Economics, Springer, vol. 46(1), pages 79-91, January.
    3. Wei He & H. Kent Baker, 2007. "Small Business Financing: Survey Evidence in West Texas," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 12(1), pages 27-54, Spring.
    4. Joaquim J.S. Ramalho & Jacinto Vidigal da Silva, 2009. "A two-part fractional regression model for the financial leverage decisions of micro, small, medium and large firms," Quantitative Finance, Taylor & Francis Journals, vol. 9(5), pages 621-636.
    5. repec:rss:jnljbs:v2i4p4 is not listed on IDEAS
    6. repec:eee:jbvent:v:33:y:2018:i:3:p:371-393 is not listed on IDEAS

    More about this item

    Keywords

    Bootstrap Financing; Small Business; Start-Up; Startup;

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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