Small business owners increasingly bankrolling their own companies
By Max Clarke
Rising business costs are adversely affecting the private lives and personal finances of many smaller business owners, according to a new study by Make It Cheaper and the Centre for Economic and Business Research (Cebr).
The research reveals that almost half of small businesses have had no choice but to inject additional cash into their company from personal sources this year.
“The effects of squeezed margins and cost increases are not only threatening businesses, but the financial security of their owners and families,” Jonathan Elliott, Managing Director of Make It Cheaper.
The study is based on independent research among owners and managing directors of 750 UK small businesses with twenty employees or less, commissioned by business saving advisor Make It Cheaper and supported by macroeconomic modelling by Cebr.
The vast majority of small businesses currently view the UK as an ‘unbearably expensive’ place to do business and many are finding they can only survive by supplementing the company with personal finances.
Almost a third of small businesses have had to turn to friends and family for a loan to cover spiralling costs while a quarter have taken out a personal overdraft, bank loan (22%) or credit card (25%) for a cash injection.
Some small business owners have been pushed into even more extreme measures, with 13% going as far as re-mortgaging their homes.
According to the Make It Cheaper research, the average amount raised from all personal channels stands at just over £20,400 per business. However this figure is much higher in some sectors, such as dental and medical surgeries — whose borrowing averages £120,000.
Cebr and Make It Cheaper have modeled an inflation tracker for small business overheads — the Business Cost Index. The Index exposes the areas which will exert the most financial pressure on SMEs this year,... continued on page two >