Sources of funding are governed by pecking order principles as indicated in Table 9.1 below.
Table 9.1 also shows that, irrespective of generation of ownership, family business owners are most favourably disposed towards the use of cash flow and retained profits as sources of capital.
For first and second generation businesses these sources are followed by bank overdraft, shareholders' funds, and bank loans.
Third to fifth generation firms appear to place greater reliance on shareholders' funds and family loans, but less on leasing finance than their first or second generation counterparts.
External equity finance
Consistent with UK findings (Poutziouris et al., 2002), external equity finance seems to be the least favoured source of capital by families in business.
Moreover, fewer family proprietors, 27.6% (39.6% for non-family businesses) are prepared to consider offering part of the ownership of their business to secure funding for growth. As shown in the Table 9.1, non-family firms are more likely to utilise equity finance, shareholder funds, and "other" sources of finance than family firms.