While federal, state and local policies aim to support entrepreneurs through grants and tax breaks that make capital more easily attainable, the latest Entrepreneurship Policy Digest released by the Kauffman Foundation, America's leading entrepreneurship think-tank, says entrepreneurs most often turn to two forms of private external financing: debt and equity.
The Policy Digest says debt is the most common source of financing for new businesses, with about 40% of a business’ initial startup capital coming from bank-financed debt. Equity is a less common form of initial funding, according to the Digest, with less than 3% of new firms funded by angel investors and less than 1% funded by venture capitalists.