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More than 10% of business decision makers in the UK have used a personal credit card or taken out a personal loan in the past 12 months to help finance the business, according to research from Santander.

The study, by Santander's Corporate & Commercial department, found that one in four (25%) had also relied on overdraft facilities over the past year.

his is especially common in the North East where 26% of SMEs said they had used personal credit facilities as financing for their businesses — more than double the national average.

Santander Corporate & Commercial’s study also found a number of firms — some 8% — also admitted they had never reviewed their finance requirements with a view to financial stability or to assess how much money is required to execute new projects.

Cash flow fears

More than two-fifths (43%) of businesses said they were concerned or very concerned about cash flow over the next 12 months.

The biggest problem, experienced by a quarter (25%) of SMEs, was late and failed payments from customers but, despite this, just 5% said they had used invoice financing in the past 12 months.

Cash flow worries are most prevalent in London, where nearly two fifths (38%) of business managers were either concerned or very concerned about their cash flow in the next 12 months.

Mike Reeves, Joint Managing Director of SME Banking at Santander, said: “It’s worrying to see that many of Britain’s small firms are relying on personal credit facilities to finance their businesses, and are concerned over effectively managing cash flow. If businesses are experiencing problems with late or failed payments, then the simple answer is invoice finance. It’s a tried-and-tested method of unlocking the value of unpaid invoices, providing companies with immediate access to their money."