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SME owners risk bankruptcy to keep businesses afloat 22 November 2013

25% of small and medium sized enterprise (SME) directors have used personal finance sources of funding to support their business, according to new research from Experian.

A range of SMEs were surveyed and Experian found that personal finance, including mortgages, credit cards and savings accounts have all been used to support business ventures.

Nearly a third of those who had used personal finance risked their homes by using personal mortgages to fund their business.

High-interest personal credit cards have also been relied upon for everyday business affairs by 47% of directors.

Another source of funds used by SME directors are personal bank accounts, as 65% admitted to having drawn funds directly from their current account and 48% dipped into their personal savings.

Ade Potts, managing director, Experian’s SME business, UK&I, said: “This research shows the 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.

“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.”

Directors stated having used personal finances to: set up their business (48%); invest in new equipment or premises (37%); pay suppliers (30%); and settle debts (26%).

The research also differentiated between the types of financing used to fund investments of varying values, and determined that most investments of £10,000 were funded using personal mortgages and savings while current accounts and credit cards funded investments under £5,000.

 

 

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