An array of federal, state and local policies aim to support entrepreneurs through grants and tax breaks that make capital more easily attainable. However, according to the most recent Entrepreneurship Policy Digest, entrepreneurs most often turn to two forms of private external financing: debt and equity.
The Policy Brief states debt is the most common source of financing for new businesses, with about 40 percent 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 percent of new firms funded by angel investors and less than 1 percent funded by venture capitalists.
The Policy Brief also highlights new forms of funding, such as crowdfunding. In the first half of 2014, more than 20 percent of new startups went through online lenders when applying for loans.