A third of small business growth finance comes from friends and family

50% of small firms experience cash flow problems every year

Nearly one third of small businesses borrow finance from friends and family with only 53% of start-up funding coming from banks, it has been revealed in new research carried out by digital lender Everline.

The report claims that 71% of managers  believe big banks fail to understand the financial challenges faced by small enterprises, while 67% believe that in the last three years banks’ services, products and behaviours have not evolved to support the need of small and medium sized businesses.

Furthermore, 68% of small business owners surveyed said a lack of access to working capital is having a detrimental effect on business growth with it taking an average of seven days to secure a loan.

The study comes as other reports reveal one in five small businesses were rejected for a credit bank loan or overdraft last year, highlighting the fact that it is more important than ever to have access to alternative forms of finance, whether from friends and family or online loan companies.

55% of respondents believe fast and convenient access to cash is of major importance with only 2% believing the opposite.

Half reported experiencing cash flow problems every year, with a further 27% every quarter. 57% said an extra £50,000 in funding would be used to grow and develop their business, upgrading tools and equipment, investing in marketing and employing more staff. In addition 40% believe slow decision-making is negatively affecting their growth.

Managing director for Everline, Russell Gould, commented: “A small injection of cash can help a small business to develop its infrastructure, build a brand and recruit the right people–it does indeed take money to make money.

“However, it’s clear that small businesses are reliant on their own personal savings and those of friends and family to fill a gap or take advantage of an opportunity.

“Many people don’t even realise that there are alternative funding options to the banks, which is why they end up turning to their family. Borrowing from friends and family puts relationships under strain and is, without a doubt, a risky approach.

“With the general election a few months away, I hope that the new government will do more to educate small businesses about their finance options and banks will better understand small businesses’ needs.”


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