Research

Not so risk averse
It’s the Great American Dream: Setting out on your own with little to no safety net and making your way in the world. Most people, though, aren’t foolhardy enough to start their own business. That’s just for crazy people, right? Well, entrepreneurs sometimes do have a few screws loose, but they’re more conservative than some folks think.

That is, when it comes to their money. A new report from the Kauffman Foundation – “Business Owners, Financial Risk and Wealth” – suggests those self-made men and women play it closer to the vest with their cash than their personalities might indicate. 

Here are some key findings from the report:  

• While entrepreneurs are typically portrayed as financial risk-takers, when it comes to saving and borrowing, they are actually more conservative than non-business owners. Forty-five percent of business owners said it was important to them to save for retirement; just 32 percent of non-business owners said the same.
• Business owners were focused on saving for the long term; they were more likely than non-business owners to say their savings horizon was five or more years in the future.
• Whether investing, saving or borrowing, business owners were more thorough than non-business owners in investigating their financial options. Ninety-one percent said they spent a “moderate” amount of time or more shopping for the best investment or borrowing terms; just 82 percent of non-business owners said the same.

1 in 5 small business owners don’t use any credit, survey determines
According to a new survey released by the U.S. Small Business Administration Office of Advocacy, one in five small businesses nationwide don’t use any form of credit at all, the Dallas Morning News reported.

The results are consistent with similar reports done in 2003, 1998 and 1933.

Such firms are significantly smaller, more profitable, more liquid and more creditworthy than firms that use some form of credit, the report said. They also tend to be in the service, retail and wholesale trade industries.

Most firms in the survey — 40 percent — use both bank credit and trade credit (buying goods or services on an account without an immediate cash payment). Those firms tend to be larger.

The 20 percent of firms that use bank credit only tend to be less profitable and less liquid. And the 20 percent of firms that use trade credit only are more liquid, but less creditworthy.

Steady and ready
The Kauffman Foundation report also shows that business owners accumulate more wealth over time than non-business owners. Business owners were less likely to say that an important reason for saving is having liquid cash available. However, they were substantially more likely than non-business owners to say they could borrow $3,000 from family or friends if needed.

They are also more likely to borrow from other sources. In the past five years, 84 percent of owners had applied for a loan, compared to just 64 percent of non-owners. And only 23 percent of them had been declined, compared to 31 percent of non-business owners.