Funding Self-Employment – The Role ofConsumer Credit

In this paper we investigate whether self-employed households use consumer loans tofinance their business activities. In particular, it is shown that self-employed householdsuse personal overdrafts significantly more often than employee households do. Thisdifference remains when controlling for financial and non-financial household variables: adiscrete change from wage employment to self-employment results in an average rise inoverdraft usage of 14.1%. These findings are corroborated when analyzing the correlationbetween consumer loan take-ups and consumption of self-employed households.Intermingling of personal and business resources is more likely when the household iscredit constrained; when the household head is younger; and when financial assets withinthe household are lower....