Evidence of Bootstrap Financing among Small Start-Up Firms

Abstract

The use of bootstrap financing for a sample of 78 firms in a Mid-western state is examined. 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 (1) the percentage of sole proprietorships 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.