By Daniel Hunter
As small businesses struggle to stay afloat, new research from Amigo Loans, has found that just 20% of micro-businesses were funded through a bank loan and one in six had to resort to a payday loan to fund their business.
On average micro businesses need just £2,143 to set up, but many have struggled to get this funding and resorted to more dangerous alternative methods, such as payday loans, while 13% were forced to borrow from a friend or family.
Of those people who have had businesses fail in the past, a fifth believe it was because they were unable to get a bank loan. Just one in ten were able to secure a loan from the bank in their first year of trading with a third having to rely on their business acumen to get them through.
Ambitious entrepreneurs are also struggling to expand and once again can’t rely on their banks to support this. A quarter (25%) of micro-businesses would need additional funds to help them expand but just one in ten believe they will be able to get funding from their bank and 14% would be forced to use their overdraft/credit card to grow their business.
But without additional funding they’ll struggle to take their business forward, a fifth (22%) would like to take on new staff and 23% have ambitions to upgrade their equipment which is unlikely to happen unless they can get the funds to do it.
“Banks have forgotten why they exist. It's scandalous that, despite billions of pounds worth of taxpayers’ money being given to them, they're not lending to these entrepreneurs who are the life blood of our economy," James Benamor, founder and CEO of Amigo Loans commented.
"For many small business owners, once they’re turned down by their bank they’ll have to try and find the money elsewhere or resort to extreme measures such as taking out a payday loan. For this to change there has to be greater awareness of the alternative funding options available - whether that's guarantor loans, peer-to-peer or crowd funding, so that small business owners don’t feel forced down a route which could jeopardise their whole business."
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