Number of Self-funded Small Businesses Jumps 18%

Report reveals that nearly half of small and mid-sized businesses are choosing to use their own savings to fund growth

Research by Bibby Financial Services (BFS) discovered that the number of self-funded, or family and friend assisted, small businesses jumped 18% in the last six months.

The number of companies relying on their own or family and friends’ savings has risen from 26% to 44%, making it the most popular form of funding among the group. The survey was conducted with 1,000 small and mid-sized businesses, of which many stated that they feel banks remain unwilling to lend to them.

BFS’s chief executive officer, David Postings, believes that the sudden increase is a result of a newfound optimism with the economy’s growth; however he warns against self-financing for long-term, sustainable growth. Postings also emphasised the need for small and mid-sized businesses to be made aware of more stable alternative financers:

“News of economic recovery in the UK following three quarters of growth has clearly had an impact on business optimism and the appeal of drawing on funds from personal savings or from family members to SMEs can be seen.

“This jump in the number of firms turning to self-funding over the last six months is worrying. As an industry we need to do more to explain to SMEs that there are a multitude of funding options available today that means a reliance on personal savings isn’t necessary, or indeed desirable for their business’ longer-term health.”

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