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1 in 5 Businesses Turn to Friends and Family for Funding

Small business funding has long been a problem for SMEs – bank lending is becoming increasingly inaccessible, and despite government schemes looking to reinvigorate the sector, the problem is still limiting growth for many businesses. While there are many alternative finance options available, such as invoice factoring, many companies are turning to friends and family for added funding – however, this is not always the best option.

According to Bibby Financial services, the number of small businesses applying for funding from external sources fell to 31% in the last 12 months. 29% failed to land bank funding or felt deterred from applying due to the increasingly stringent lending requirements of the banks.

Of the 1000 businesses interviewed, 14% said they had not managed to secure enough funding to follow through on their business plan. It is therefore not surprising that 20% have therefore turned to friends and family in order to try and secure the funding that they need to get their business on track.

With bank lending falling by £3bn in the three months leading to May, it’s hardly surprising that businesses are finding it tough to get hold of the funding that they need. However, friends and family should not always be relied upon, as this can not only put pressure on your relationships but can prove disastrous if your business continues to struggle. After all, like any investor they will want to see their money again. If your business is struggling to put together funding, then turning to alternative finance providers is another option.

If your business issues invoices on a basis of 30, 60 or 90 days then you can look to invoice factoring or invoice discounting to help you raise some extra cash flow. You can unlock the money tied up in unpaid invoices to make sure you’ve got all the cash flow you need to reinvigorate growth plans and keep your day to day operations running smoothly. If your company needs funding, then there are other places to turn.

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