As borrowing continues to be problematic this year, it is predicted that small business owners with financial difficulties may find themselves looking for financial assistance from their family and friends, not to mention borrowing on personal finance such as credit cards. This information comes courtesy of a survey conducted by Graydon UK, a commercial credit reference agency, and the Forum of Private Businesses. The information was based on 2009 but with these issues still prevalent in 2010 it is likely that the same pattern will continue.
The survey showed that 28 per cent of business owners felt that they had no option but to turn to loved ones for financial help due to the lending conditions adopted by the banks. A further 8 per cent admitted to using their personal credit cards.
The survey also looked at those who ad attempted to access funding from the banks. 40 per cent who applied for finance in the second half of 2009 were refused. 52 per cent were refused business loans and 28 per cent asked for an overdraft extension and were refused.
Discussing the results of their survey, Graydon UK said this move towards accessing personal finance is having a direct impact on the growing number of insolvencies during the latter half of 2009.
Phil Orford, chief executive of FPB, said: “The continuing credit drought means more entrepreneurs are being forced to seek alternative sources of finance – including family, friends and personal loans. The latest insolvency figures show that this level of personal risk is unsustainable. The danger is that the UK will become increasingly uncompetitive as fewer people are encouraged to start their own businesses.”