Businesses using multiple methods of funding – but mostly personal savings

Three quarters of small companies have to use their personal savings as working capital, research finds.

In the last year alone more than a third of small business owners have been forced to turn to more than one source of funding for start-up capital, and almost three quarters launched their new business ventures with working capital of £2,000 or less, according to a survey by online freelancer marketplace PeoplePerHour.

Of the 1,000 small business owners polled, 15.6 per cent were helped by the ‘bank of friends and family’.

Only 2.7 per cent of those surveyed raised funds through banks, prompting business owners to look into raising funds by other means.

Some 31 per cent of those who had raised money had raised it through two separate channels and a further 6.2 per cent had been forced to use three separate sources to raise funds.

The number of people starting businesses has risen significantly in the past few years, but 44.6 per cent of those surveyed are not sure that raising capital was any easier than it was five years ago.

Only 19.4 per cent of those surveyed had managed to raise 100 per cent of what they were looking for in the first instance with 5 per cent only achieving 40 per cent of what they originally wanted.

And just 27 per cent are comfortable with what they had raised, with the other 73 per cent considering themselves underfunded. In view of this it is small wonder that business owners are turning to options other than banks such as peer-to-business loans and crowdfunding.

The standout issues for small business owners remain the same with 37.1 per cent citing cash flow as the biggest headache, and over a quarter maintaining that access to funds is a significant problem.

Staff recruitment concerns 7.2 per cent of small business owners along with 5 per cent claiming government red tape, and lack of business support and advice are other obstacles.

PeoplePerHour founder Xenios Thrasyvoulou says the online revolution has ‘opened the gateway’ for new businesses, with a whole new generation of young eager entrepreneurs launching businesses from laptops at a time when it’s never been easier or more cost effective.

‘Businesses still face the same age old problems; it is essential that business owners follow sensible practices from day one, ensuring that they never overstretch themselves by expanding too quickly and taking on too many full-time staff, putting undue stress on their company’s financial position,’ he adds.

Further reading on business finance

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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