By Daniel Hunter

Nearly a third (30%) of finance borrowed by small business decision makers comes from friends and family, with only 53% coming from banks, according to new research by Everline, the digital lender for small businesses.

The research, which surveyed over 1,000 small business decision makers in the UK, found that 71% of small business managers feel that banks don’t understand the changing challenges that small businesses face which partly explains the borrowing from friends and family.

In addition, 67% feel that banks’ services, products and/or behaviours have not evolved to support small and medium sized businesses in the last three years. Despite the accelerating speed of business driven by the Web, businesses, on average, expect securing a business loan to take 7 days.

The study also found that half (49%) of respondents experience cash flow problems each year and a further 27% experience them at least once a quarter which highlights the need to further financially support small businesses. More than half (55%) believe that having fast and convenient access to cash is becoming more important to small businesses — only 2% believe that it is becoming less important.

In addition, 68% of small business decision makers believe that lack of working capital is having a detrimental effect on their business growth and 40% believe slow decisions are negatively impacting their growth. If given an extra £50,000, the majority (57%) would use it to grow and develop their business by upgrading tools and equipment, employing more staff and investing in marketing, for example.

Russell Gould, Managing Director, Everline said: “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. Businesses no longer need to wait a week for a loan — they can get a cash injection in just a few hours. Fast and flexible finance is invaluable for small business owners, and they should embrace it in a measured manner when necessary.”

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