Member Article

Businesses turn to banks of friends and family

One in five small business owners in Yorkshire turned to the bank of ‘friends and family’ for start-up capital, and more than three quarters (76%) launched their new business ventures with working capital of £2,000 or less, according to a survey of small business owners conducted by online freelancer marketplace PeoplePerHour.

Of the 5,000 small business owners polled by PeoplePerHour, 80% said they had to use their own personal savings as working capital, while 12% said that redundancy money provided their start-up funds.

Only 3% of small business owners polled said they were able to secure a bank loan to get their business off the ground, highlighting the banks’ reluctance to lend to riskier start-ups. As a result, business owners have been forced to look elsewhere for funding to get their ventures off the ground.

When small business owners were asked what the biggest obstacles they faced when starting out, nearly half (48%) said struggling to maintain cash flow was a chief concern, while nearly a quarter (24%) said access to funding was the main problem. One in seven (15%) said the lack of business support and advice was an issue, while 9% admitted government red tape was holding them back, and 4% had problems recruiting skilled staff.

Xenios Thrasyvoulou, founder and CEO of PeoplePerHour, commented: “The challenge of launching a new business is no better illustrated than by the number of business owners in Yorkshire who are having to rely on friends and family to raise start-up capital, largely because of the void left by the banks shutting up shop.

“It helps that it’s never been easier or cheaper to start a business from scratch, opening up the self employed route to a whole new generation of aspiring entrepreneurs. Businesses are being launched from kitchen tables across the country, as the online revolution has knocked down the barriers to entry.

“Businesses still face the same issues though – top of the list a failure to get to grips with cash flow. It is essential that business owners follow sensible business practices from day one, to ensure that they don’t over stretch themselves.”

This was posted in Bdaily's Members' News section by Mark Lane .