The Capital Structure of New Firms

Research Seminars

This paper investigates the capital structure choices that entrepreneurs make in their firms' initial year of operation, using restricted‑access data from the Kauffman Firm Survey. Contrary to many accounts of startup activity, the firms in our data rely heavily on external debt sources such as bank financing, and less extensively on friends and family-based funding sources. Many startups receive debt financed through the personal balance sheets of the entrepreneur, effectively resulting in the entrepreneur holding levered equity claims in their startups. This fact is robust to numerous controls for credit quality, industry, and business owner characteristics. The heavy reliance on external debt underscores the importance of well functioning credit markets for the success of nascent business activity.

The Paper "Who Seeks and Who Receives? - Implications of Demand for and Access to Financial Capital by Young Firms" (PDF, 203 KB) is available for download.


 Alicia Robb, PhD

Alicia Robb, PhD // Ewing Marion Kauffman Foundation, Kansas City


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