More small firms depend on personal finances

A significant proportion of the UK’s small firms may be relying on the personal finances of their owners in order to continue trading.

That was the finding of a survey conducted by the think-tank, the Centre for Economic and Business Research (CEBR).

Polling some 750 enterprises employing 20 workers or fewer, the CEBR reported that, on average, business owners have been directing £20,000 from personal assets into their firms.

Of those who responded, 27 per cent admitted to requesting loans from family and friends in order to keep the businesses solvent.

A similar proportion (26 per cent) conceded that they had taken out personal overdrafts or bank loans, or had turned to their credit cards, to maintain their business activities.

More alarmingly, 13 per cent had re-mortgaged their homes to provide their businesses with liquidity.

The survey was carried in partnership with price comparison website, Make It Cheaper.

Make It Cheaper’s chief executive, Jonathan Elliot said: “It is extremely concerning that small business owners have been compelled to take the drastic step of placing their own financial stability in jeopardy to keep the company afloat.

However, many small businesses feel they have no alternative, as costs rise and traditional lines of credit remain cut off. It is no surprise that so many are turning to personal loans and credit cards to survive.”