There can be little doubt that the UK economy is showing definite signs of improvement.
Overall levels of unemployment are continuing to fall steadily, and confidence is beginning to return to the markets. However, as any accountant will tell you, raising finance or getting access to some of the money held by our major banks is still proving to be problematic.
Just how challenging is clearly demonstrated by the latest research carried out by Experian.
The global information services group recently conducted a survey to determine how easy it was for small and medium-sized enterprises to get access to finance, and found that the situation had deteriorated to the point that roughly a third of SME directors had been forced to resort to using personal sources of finance to generate capital for their businesses.
Experian’s survey of 600 SMEs found that over 30% of directors had to resort to re-mortgaging to fund their businesses, even though this potentially put their homes at risk. 47% of directors even admitted to using personal credit cards to fund their outgoings. Even more startling was the fact that over 60% of directors surveyed admitted to drawing money from their personal accounts to fund their businesses, whilst almost half had been obliged to dip into their personal savings.
Experian’s survey found that SME directors are using personal funds to:
- set up their business, (48%).
- invest in new equipment or business premises, (37%).
- pay suppliers, (30%).
- clear off existing debt, (26%).
Ade Potts, managing director of Experian’s SME business UK & Ireland, maintained that the results of the survey clearly demonstrated the determination and resourcefulness of SME directors, but also acknowledged that the short-term solution of using personal savings to keep businesses afloat was potentially risky. He added:
“This research shows that SMEs are becoming increasingly resourceful when it comes to funding and are using a variety of different financing options that are available to them to set up or expand. However, there are some key factors that SME directors should consider before using personal finance sources.”
“Although it might initially seem like using personal funds for business purposes is the easiest route, it can affect personal credit records and leave them vulnerable, particularly when you consider people are using their homes as security.”
If your small business is looking to raise finance for either consolidation or expansion, then Steven Glicher would always recommend speaking to an accountant. Our accountants can give your business expert advice on raising finance and business planning. We’ll help your business identify what sort of funding you’ll need and the most suitable sources of finance: we’ll even help you with the cash-flow projections, the budgets, and the trading forecasts. We can also offer expert advice on business growth, strategic planning and tax planning.
For further information call Steven Glicher accountants on 0161 485 8007, or email info@.