Question of the Day: What source of funding is used most often to start new businesses?
Can you guess how most entrepreneurs are paying when they start their new business?
Answer: 83% of businesses use personal or family savings to get started
Questions:
- Why do you think such a high percentage of businesses use personal or family savings as their primary source of funding? How might this affect the type and size of businesses that can be launched?
- How might a lack of savings for low-income and other marginalized groups hinder diversity and representation in the business world?
- How might early exposure to entrepreneurship and financial education influence an individual's willingness and/or ability to save and start a business?
Behind the Numbers (altLINE):
"When considering startup capital, there are two main categories of funding new businesses use: equity and debt. According to the SBA, 3 in 4 new businesses use personal savings; roughly 1 in 5 use a bank loan (19%).
Other sources of startup income in both categories include a loan from family or friends, venture capital funding, or leveraging earnings from an existing business.
Sources like federal grants have also become more popular in the wake of the COVID-19 pandemic, and support for small businesses is on the rise. In 2021, for instance, the Biden administration awarded $154.2 billion in federal contract dollars to small businesses, up $8 billion from the previous year."
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NGPF's Entrepreneurship mini-unit will give you lots of tools to get your students thinking like innovators and problem solvers!
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About the Author
Ryan Wood
Ryan is the Partnerships and Adoption Manager for Next Gen Personal Finance’s midwest region. He brings his experience as a former teacher, curriculum designer, and sales and marketing professional to state organizations and school districts in supporting the implementation of their personal financial education efforts. He graduated from the University of Wisconsin-Green Bay and earned his teaching credential from Saint Mary’s University in Winona, Minnesota. He proudly taught at two rural high schools in Wisconsin before transitioning to curriculum design at NGPF, and is now excited to be on the front lines in delivering the best possible financial education in the midwest. He and his wife have three beautiful daughters, each of which inspire him to share the impact of being sound financial stewards both at home and as lifelong learners.
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