Page 138 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

Building Communities through Entrepreneurship Development 127

that may exist in their communities, providing further justification for the
creation of a system of support for entrepreneurs rather than simply creat-
ing more capital programs.
Third, as noted in the study by Bhide (2000), most entrepreneurial ven-
tures start with little outside capital. The entrepreneurs’ assets, and those of
family and friends, are most often used to launch a venture. In rural com-
munities, entrepreneurs often lack the assets to commit to the start-up
process—accessing any source of capital may first require some focus on as-
set building especially among low- and moderate-income rural entrepre-
neurs. The increased promotion and use recently of the Individual Devel-
opment Account (IDA) as a vehicle for saving for business development
represents an important corollary strategy for accessing capital for some en-
trepreneurs in rural America (Ssewamala, Lombe, and Curley 2006).
In spite of these constraints, entrepreneurs are starting and growing busi-
nesses throughout rural America. In some cases, the entrepreneurs them-
selves have become adept at finding and tapping the capital needed to
move their ventures forward. In other cases, public and private sector insti-
tutions have recognized capital gaps and created innovative solutions to
meet the needs of rural entrepreneurs. In both cases, however, it is impor-
tant to understand how the capital needs of entrepreneurs vary as a business
develops and which forms of capital are best suited to meet those needs.

THE CHANGING CAPITAL NEEDS
OF RURAL ENTREPRENEURS

Each stage in the development of a business venture requires different
amounts and forms of capital. To keep the focus of discussion on the en-
trepreneur, and not the business, this section identifies four distinct times
during which entrepreneurs are likely to seek capital to support their
dreams about the business:

1. Financing Idea Generation and Testing. This is the time when the entre-
preneur is developing a marketable product or service. For example,
an entrepreneur with an idea about the next generation of tax prepa-
ration software may be developing and testing the program. An entre-
preneur with a dream of opening a wireless Internet cafe on main
street may be doing customer surveys and beginning to identify suit-
able technology.
2. Financing Enterprise Start-Up. With testing complete, the entrepreneur
begins the start-up process. This phase requires capital for building in-
ventories, purchasing equipment, covering infrastructure costs, and
other aspects of starting a business.