Small business funding: Who really provides it?

One of the FundingKnight team recently stumbled across this great video from The Kauffman Foundation.  It’s called “Money Game” and sets out to answer the question, where exactly do young companies get their business funding from?

Well, it might surprise you to know that over half of young companies don’t need any external funding at all.  Over 50% rely on founder savings and then positive cash flow from the business to keep the growth wheels turning.

Of those who do need to tap up others for cash, the list goes something like this according to the Kauffman Foundation…

Credit cards – The single biggest source of business funding after founder savings

Family & friends – Once you’ve exhausted your own savings, next stop is your family and friends who know and trust you and want to help you succeed.

Banks – The video makes a good point that despite the facts that banks steal most of the attention when it comes to small business loans, they actually provide relatively few – you see the businesses that it makes sense for banks to lend to are quite often not the same ones that want to borrow… it’s a catch-22.

Venture Capitalists – VC funding hits the headlines every time a Google or Facebook floats but again, the reality doesn’t quite live up to the hype.  Less than 20% of the fastest growing companies in the US took no VC money at all.

Angel investors, new finance – This is where peer to business lending comes in.  There is a growing trend towards more people lending smaller amounts directly…. if you want to join in, sign up to stay in touch with FundingKnight

Thanks to the Kauffman Foundation for letting us share their video.

About The Kauffman Foundation It is the largest foundation in the US devoted to entrepreneurship.  “Every individual that we can inspire, that we can guide, that we can help to start a new company, is vital to the future of our economic welfare” said founder, Ewing Kauffman.

You can find “Money Game” and many other Kauffman sketchbooks to share here

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