2021 State of Startups

were looking for angel or venture capital. The remaining 4.0% were not-for-profit organizations seeking grants or private donations. Debt Funding Over half of startups are financed by loans and other debt. 27 The most popular source of debt funding for U.S. startups is via Small Business Administration (SBA) backed-lending, most commonly through its 7(a) and 504 programs. The 7(a) program is the SBA’s flagship program, and standard 7(a) loans can be approved up to $5 million and can be used for many business expansion purposes, including working capital. 28 Projects that were not seeking funding included strategic plans (4.8%), cannabis licensing (4.8%), requests for proposal (3.5%), and Mergers & Acqui- sitions (0.8%). For businesses that require outside funding, choosing the best source of that funding re- quires evaluating numerous factors, including which industry you’re operating in, how much control you want to maintain, the importance of a low interest rate, whether you can afford a down payment and have access to collateral, and whether your company would benefit from strategic partners with ownership. Of the 86.2% of projects seeking funding, 58.4% sought bank or institutional lending while 23.8% Most businesses require capital injection during growth phases. In fact, of Masterplans projects in 2020, 86.2% were used to attain out- side funding. Funding Type 27 “Frequently Asked Questions: Small Business Finance.” SBA Office of Advo- cacy. February 2014. Source: tinyurl.com/1txno6ar 28 Prakash, Priyanka. “The SBA 7(a) Loan Program: The Ultimate Guide.” Fun- dera. December 2020. Source: tinyurl.com/y5e6mcj4

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