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SME owners using personal money for funding

With small business loans becoming harder than ever for firms to access, more and more business owners are using their own personal money to inject investment into their companies. Confidence in bank lending is falling, and despite the different options for alternative finance, such as factoring and invoice discounting, many businesses are unaware that there may be a better option than digging into their own pockets for funding.

Nearly half of all small business owners have used their own funds to inject capital into their business, according to BDRC’s most recent SME finance monitor. This tracked the activities of a number of UK start ups and small businesses, and revealed that 41% of business owners had used their own personal money for investment. Around a quarter of these said it was their only option, with all other forms of external finance being beyond their reach.

Confidence in bank lending in Q2 of 2012 has fallen to its lowest level since the Finance Monitor began. Confidence in the banks impacts on small businesses’ willingness to expand and grow, with many instead looking to weather the storm rather than proactively looking to grow their business. With ongoing turmoil in the Eurozone and UK economic conditions looking rather gloomy, it seems that without adequate funding SME business confidence does not look set to improve in the near future.

However, there are other options for many SMEs. Invoice finance is one form of alternative funding that could help your business get back on track. While the banks might be unwilling to lend, invoice factoring is a flexible, affordable and accessible way for many businesses to unlock capital quickly. If your business issues invoices on a 30, 60 or 90 day basis, then you can release up to 90% of the invoice value within 24 hours - this not only improves cash flow but boosts turnover, meaning you’ve go the breathing room to think about growing your business.

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