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Where are SMEs getting their Funding?

Where are small businesses getting their finance from these days? With the banks often unable, or unwilling, to lend to SMEs, it can take a bit of creativity to get access to the funds you need. So, where is everyone else getting their cash from? According to a survey conducted by online freelance marketplace PeoplePerHour, of the 5,000 SMEs interviewed, there were a variety of responses.

- 20% of small business earners have gone to friends and family for start-up capital. What’s more, 75% of them launched new business ventures with working capital of less than £2,000.

- 76% of business owners had used their own personal savings as working capital, with 13% using money from redundancy in order to get the cash together to start up a new business.

- Only 3% of small business owners polled were able to secure a bank loan in order to get their business going. This is a tiny percentage and highlights the unwillingness of banks to lend to ‘risky’ start ups. This is one of the reasons so many businesses are going elsewhere for funding right from the start of their business life.

- PeoplePerHour has seen the number of new businesses on its site more than double in the past year, partly due to the economic climate but also as more people are choosing to become entrepreneurs in the face of a depressed job market.

So what are the biggest challenges faced by small businesses? Starting up a new business isn’t ever trouble-free, and the biggest problems encountered included:

- 49% struggle to maintain good cash flow

- 25% believed access to funding was their main problem

- 15% believed lack of business support and advice was holding them back

- 6% felt government red tape was restricting their growth

- 5% felt they lacked the skilled staff to help them expand

As this all shows, it’s a challenging atmosphere for SMEs at the moment. However, looking into alternative finance options such as factoring, crowd funding or asset based lending could help to make it all a bit more bearable.

 

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