After a lack of market need for their product or service, and a resulting inability to find customers, the second most common reason for business startups to fail is running out of cash. According to a U.S. banking study, 82% of business failures are due to poor cash management. Securing adequate cash flow to maintain the business and to sustain personal needs was a top concern for startups.

SCORE’s latest infographic examines how entrepreneurs finance operations in their first year of business.

This infographic highlights the findings of part 2 of The Megaphone of Main Street: Startups report.

Startup entrepreneurs rely on personal savings and income for funding.

How much cash did you have in startup funds before starting your business?

  • Personal funds: 66.3%
  • Income from another job: 27.6%
  • Borrow from friends/family: 11.3%
  • Bank loan: 11.2%
  • Cash advance from credit cards: 9.0%
  • Donations from friends/family: 6.4%
  • Investors: 3.4%
  • Grants: 2.1%
  • Crowdfunding: 1.7%

42% of entrepreneurs started with less than $5,000 in cash reserves.
49% started with more than $10,000.
24% started with more than $50,000.

78% did not seek outside financing

% of startups successful in obtaining financing:

  • Bank or other financial institution: 8.2%
  • Friends / family loan: 4.8%
  • SBA loan: 3.1%
  • Online lenders: 2.3%
  • Angel investors: 1.4%
  • Crowdfunding: 0.8%

Only 10% of all entrepreneurs received startup funds of more than $25,000.

Most startups used outside financing for equipment, supplies and marketing.

What did you use your first year outside financing for? (check all that apply)

  • Purchasing equipment: 63%
  • Purchasing inventory: 48%
  • Marketing: 48%
  • Leasing and preparing business location: 41%
  • Product development: 27%
  • Hiring staff: 26%
  • Paying my salary/support during startup: 24%
  • Other (licenses, operating expenses, etc.): 11%

Whether you’re a startup or an established business, SCORE mentors can help you succeed.

The Megaphone of Main Street: Startups Infographic #2 - Finding Financing

The Megaphone of Main Street: Startups Infographic #2 - Finding Financing