By Marcus Leach
New research from borro, the UK’s leading personal asset lender, shows that over the last year more than one in ten (12%) small business owners in the UK have had to put their own homes on the line as a guarantee for a loan to continue doing business in 2011.
The survey of 300 owners and directors of small businesses also showed that a further third of small businesses (33%) would consider using their home as a guarantee if they couldn’t get any other kind of finance to help with issues such as cash flow problems, late payments from customers, tax bills and staff wages.
The analysis goes on to reveal that the number of small business owners considering using a secured loan to get the capital they need to continue growing is now at the same level as those considering using an unsecured loan (38%) and an overdraft facility from their bank (33%).
“Using your family home as a guarantee for a loan is a huge step for a small business owner and can be risky in this uncertain economic climate but it seems many feel they have no other choice," Paul Aitken, CEO of borro, commented.
"It’s surprising to see that as many small business owners would consider applying for a secured loan as would apply for an unsecured loan or an overdraft, a sign that as banks continue to make it hard to access unsecured lending facilities, so those that require property as security become the next thing to turn to.”
With a quarter (24%) of all small businesses saying they have missed out on opportunities to grow their business due to lack of finance, it is not surprising that over two thirds (67%) of SMEs believe that banks should relax their lending criteria.
With bank confidence still at an all-time low, small business owners have turned to their personal funds to boost their businesses. Over half (57%) of small business owners have used their personal funds to inject capital into their business and 17% have asked friends and family for additional funds.
“Loans and overdrafts from a bank aren’t the only options open to small businesses today," Paul Aitken added.
"The lending marketing has opened right up. Our analysis shows that small business owners are looking further afield to get the funding they need. A quarter of small businesses (26%) said they have used or would consider using their personal assets and possessions such as cars, jewellery, fine art and antiques to secure a loan for their business. The majority of borro’s customers are now SME owners and we have seen a huge increase in this trend over the last year.”
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