SME owners overly reliant on personal finances

One in four small business owners has revealed that they turned to their own personal finances to help bail out their business or to fund growth in the last two years.

According to research from Opus Energy, 24% of owners and key decision makers at firms with a turnover of £250,000 or less has used their own money, while just 4% had turned to a business loan for help.

In comparison, not a single owner of a business with a turnover of between £2 million and £2,999,999 million has used their own money, while nearly a third has used a business loan.

The figures suggest that the personal finances of small business owners are therefore at greater risk, with them potentially requiring personal insolvency measures should something go awry.

The research studied performance and confidence levels among UK small businesses which highlighted that a large proportion are taking with their finances.

More than half of owners and decision makers in firms with a turnover of between £250,000 and £499,999 revealed they had gone without a monthly paycheque in the last two years, for example.

While small business owners might be reluctant to lock themselves into high-interest sources of finance, using their own pockets to fund growth is not recommended.

A range of alternative finance options exist to support those looking to grow while a thorough examination of business accounts may also highlight areas where savings can be made through increased efficiency measures.

Interestingly, when it comes to financial advice, 25% of small business owners with a turnover of £250,000 or less reported that they would turn to friends and family for help, whereas just 6% would contact a professional consultancy service.

As businesses increase in size, the key decision makers were more likely to seek professional support, mainly as key financial decisions can a wider-ranging set of impacts.

If a business is facing difficulties, turning to professional help is recommended – corporate advisory services can help to realise the potential of a business, as well as providing support with refinancing, restructuring or even with an exit strategy.

By Phil Smith

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