A recent study by Shawbrook indicates a concerning trend among SMEs, with many turning to personal finances to support business growth.
- 71% of SME owners have utilised personal finance resources to fund their business ambitions in the past year.
- The use of personal credit cards, savings, and personal loans has surged among businesses, with notable increases from previous years.
- Large SMEs are not exempt, as more than half rely on personal financing channels.
- While personal finance reliance rises, a significant number of SMEs are exploring alternative funding solutions.
In a detailed survey conducted by Shawbrook, it was revealed that an overwhelming 71% of small and medium-sized enterprises (SMEs) are turning to personal financial resources to support their business goals. This trend represents a significant reliance on personal credit cards, savings, and even personal loans for funding. Remarkably, 54% of the respondents confessed to using personal credit cards, while 53% opted for personal savings. A further 39% admitted to taking out personal loans to facilitate their business operations.
Comparing this with last year’s data, there has been a noticeable surge in the percentage of business owners resorting to personal savings, credit cards, and loans, with increases of 15%, 13%, and 8%, respectively. This shift highlights a growing dependency on personal financial resources, even among larger SMEs.
Alarmingly, businesses with 100 to 249 employees are not exempt from this trend. The survey highlighted that 55% of these larger SMEs used personal credit cards, 49% relied on personal savings, and 42% resorted to personal loans. This underlines a broader issue affecting businesses across various scales.
Despite the increasing dependence on personal finances, there is a positive trend where SMEs are looking towards alternative finance solutions. The research noted that 78% of SMEs have accessed alternative finance, marking a rise from 73% in 2023. Products such as invoice finance, asset finance, asset-based loans, and commercial loan facilities have seen increased use, indicating a shift towards more sustainable financing options.
The study also unveiled that a significant portion of business leaders, precisely 73%, are worried about the rising costs associated with running a business. This concern reflects the challenging economic landscape that many SMEs navigate, prompting them to explore various funding sources.
The findings emphasise the complex financial challenges SMEs face, underscoring a pivotal shift towards diverse financing strategies.
