Some 41 per cent turned to alternative finance sources to raise capital, compared to 35 per cent who applied for bank loans and overdrafts over the last two years, says finance advisory firm Credit Pal.

Of those, 11 per cent asked friends and family for funds, while 8 per cent say they have sold personal assets, 4 per cent have turned to private lenders and 1 per cent had to withdraw their children from private education in order to save money.

Chris Poll, CEO of CreditPal, says: ‘We believe we have identified an SME fear factor at play, with companies more likely to seek finance from non-traditional sources because they are scared of even applying for finance from banks and building societies.

‘We desperately need to see a return to traditional lending if the economy is to return to an even keel. In the long-term, the sale of private assets is not sustainable and relying on friends and family for funding can prove a financial and emotional risk if there are problems with repayments.’

Of the 540 SMEs polled, 31 say they have cancelled family holidays in order to keep their businesses afloat.