An Examination of Small Firm Bootstrap Financing and use of Debt
Vol. Volume 17 Number 1 March/2012
Howard Van Auken
This study examines the relationships between entrepreneurs’ use of bootstrap financing methods and access to short- and long-term debt capital. By providing additional funding options, bootstrap financing helps alleviate liquidity issues by providing small firms additional sources of capital when more traditional sources are not accessible. Capital constraints can result in firms being unable to successfully compete and often lead to difficulties associated with liquidity constraints. The findings show that use of short- and long-term debt capital is directly associated with the use of bootstrap financing sources. The growing body of research is demonstrating that bootstrap financing is commonly used, but is related to the use of debt capital. These findings contribute to the growing body of research on small firm use of bootstrap financing and can be used by owners of small firms, consultants and educators. Programs that provide educational assistance to owners of small firms, including university courses and practitioner seminars/workshops, can expand the coverage of bootstrap financing in the curriculum.
Bootstrap financing, small firm financing, capital structure, bank lending.