Most Small Businesses Start Without Outside Capital

New Census reports reveal how the nation's businesses are funded, where they are based, and other demographics.
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Half of U.S. businesses are home-based and almost two-thirds are self-financed, according to a pair of new Census Bureau reports.

Nearly 2.5 million firms were interviewed for the two reports, which were released Wednesday as part of the bureau's ongoing 2002 Survey of Business Owners.

Home-based businesses collectively generated a remarkable amount of economic activity, especially for women and minorities, Louis Kincannon, the Census Bureau's director, said in a statement.

The survey found that 49 percent of the nation's businesses were home-based. Fifty-six percent of both women- and American Indian-owned firms were home-based, compared to 33 percent of Asian-owned businesses.

Companies in certain industries were more frequently run from home, with professional, scientific, and technical services, construction, and retail companies topping the list.

In addition, "most businesses are started by people and families who dig into their own pockets," Kincannon said.

Seventy-seven percent of companies with paid employees were started by entrepreneurs who used their own assets, or those of their families. The figures were slightly lower for companies with no paid employees, at 59 percent.

The report also found that 28 percent of entrepreneurs started or acquired their businesses with no capital at all, and that roughly one out of every 10 businesses was started with credit cards. Businesses in manufacturing, hospitality services, wholesale trade, and retail were the most likely to land on the "self-made" list.

As for the owners themselves, the majority are middle-aged men. According to the Census Bureau, only one-third of business owners were female, and the largest portion of business owners -- 29 percent -- were between the age 45 and 54. Only 2 percent of owners were under the age of 25.

Sixty-four percent of owners had at least some college education when they started their companies, but only 23 percent had a bachelor's degree and only 17 percent had a graduate degree.

Last updated: Oct 3, 2006




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