Small firms in general have limited access to funding, which is a major problem for entrepreneurs. In particular, this problem is evident for women and ethnic minority groups. The purpose of the study is to examine empirically the impact of gender, ethnicity and other relevant variables on the access to external financing of new small firms. A sample of 2,764 female- and male-owned small businesses, based on a unique and large database gathered through interviews, was investigated employing binary logistic regression models. The results suggest that both gender and ethnicity are significant explanatory variables influencing the access to external capital at the start-up stage. Entrepreneurs’ age, experience of starting businesses and education, as well as additional jobs beside their own business, are other variables that influence the way in which entrepreneurs finance their business. Moreover, firm characteristics in terms of personal start-up capital, firm size and legal form have an impact on financing behaviour at start-up. Since the knowledge about this issue is limited, the results of this study add to our understanding of the variables affecting the behaviour of small business endeavours in seeking funding at start-up.
Keywords: gender, ethnicity, small business finance, informal capital, start-up capital