Entrepreneurs dig into their own pockets for funding

A survey suggests in the absence of bank funding, entrepreneurs are turning to alternative sources to stay afloat.

by Emma Haslett
Last Updated: 03 Oct 2014
MT wasn’t the only one who was pleasantly surprised last week, when banks reported that on the whole, they’re on-track to meet targets when it comes to lending to businesses. Then again, their records were less impressive when it came to small business lending, falling about £6m behind target. So it’s inevitable that businesses have had to turn elsewhere to borrow – and a new survey has suggested that almost half of entrepreneurs have put their hands into their own pockets in order to keep their businesses afloat. Not good…
 
According to the survey of 750 businesses by business utilities comparison site Make It Cheaper and the Centre for Economic and Business Research, 27% of entrepreneurs have had to turn to their friends and family for cash, while 26% have taken out an overdraft. A quarter say they’ve put it on their credit card, while 22% have taken out a bank loan and 13% have even had to remortgage their house. It doesn’t take a mathematical genius to realise that some will have had to go down more than one route.
 
According to the survey, 89% of small business owners see the UK as Indeed, the average amount of their own dosh which small business owners are in for is £20,400. Interestingly it is doctors and dentists who have raided their piggy banks to the greatest extent, with £120,000 being the average sum for these businesses. But then their costs are probably higher, you wouldn’t want your dentist to do that root canal filling with a worn out drill now, would you?
 
The survey has also come up with a rather natty Index, which attempts to predict what business’ biggest costs will be over the next year, based on historical figures. It predicts that transport costs will rise by 20.5%, energy bills will grow by 8.5%, and insurance premiums will go up by 7.1%. More, probably, if last night’s rioting is anything to go by.
 
To be fair, a certain amount of this is to be expected: entrepreneurs have always turned to alternative sources for finance. But it’s clear, too, that businesses are becoming increasingly reliant on these sources. Time for banks to have a rethink?

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