Business Owners Put Their Homes on The Line

  • SMEs now just as likely to apply for a secured loan as they would an unsecured loan or an overdraft  to get access to funds
  • Over half of SME owners turn to personal sources of finance to fund their business with bank confidence still at an all time low
  • borro sees rise from SMEs lending against their personal assets to grow their business

New research from UK personal asset lender borro shows that over the last year more than one in ten (12%) small business owners in the UK have had to put their own homes on the line as a guarantee for a loan to continue doing business in 2011.

The survey of 300 owners and directors of small businesses also showed that a further third of small firms (33%) would consider using their home as a guarantee if they couldn’t get any other kind of finance to help with issues such as cash flow problems, late payments from customers, tax bills and staff wages.

The analysis goes on to reveal that the number of small business owners considering using a secured loan to get the capital they need to continue growing is now at the same level as those considering using an unsecured loan (38%) and an overdraft facility from their bank (33%).

Paul Aitken, CEO of borro, comments:

Using your family home as a guarantee for a loan is a huge step for a small business owner and can be risky in this uncertain economic climate but it seems many feel they have no other choice. It’s surprising to see that as many small business owners would consider applying for a secured loan as would apply for an unsecured loan or an overdraft, a sign that as banks continue to make it hard to access unsecured lending facilities, so those that require property as security become the next thing to turn to.”

With a quarter (24%) of all small businesses saying they have missed out on opportunities to grow their business due to lack of finance, it is not surprising that over two thirds (67%) of SMEs believe that banks should relax their lending criteria.

With bank confidence still at an all-time low, small business owners have turned to their personal funds to boost their businesses. Over half (57%) of small business owners have used their personal funds to inject capital into their business and 17% have asked friends and family for additional funds.

Paul Aitken added:

“Loans and overdrafts from a bank aren’t the only options open to small businesses today. The lending marketing has opened right up. Our analysis shows that small business owners are looking further afield to get the funding they need. A quarter of small businesses (26%) said they have used or would consider using their personal assets and possessions such as cars, jewellery, fine art and antiques to secure a loan for their business. The majority of borro’s customers are now SME owners and we have seen a huge increase in this trend over the last year.”

borro offers small business owners, entrepreneurs and all other customers short-term loans of up to £1,000,000 with loans secured against assets including fine art, antiques, prestige cars, luxury watches, diamond jewellery, gold, yachts, fine wine and other high value assets.

For further business advice see our articles on business angels, financing your business and overdrafts and loans.

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