It has never been a better time to start a business in the UK, although money worries do persist for those going it alone, according to a study by FreeAgent.
The majority of UK freelancers and micro-business owners are self-funding rather than relying on external financial support, according to the survey of more than 500 micro-businesses.
Almost half (44 per cent) of respondents don’t require any funding to get their business venture started, while 43 per cent have only used personal savings to do so.
With a record number of new business registrations in the past year, government-funded enterprise campaigns such as Startup Britain are helping small businesses to get up and running with little or no external investment.
Additionally, the research shows that just 4 per cent of micro-businesses say they had used a loan from a friend or family member to get their business idea off the ground, while as little as 2 per cent use their credit card or secured a bank loan, and only 1 per cent used government assistance.
While getting started does not seem to be the problem, the research finds that life can be more of a struggle once those businesses actually get off the ground, with 41 per cent of micro-businesses saying they do not make enough money to cover their costs, or ‘only just’ make enough to cover them.
Many micro-business owners are also focussing their attention on their business at the expense of taking time off; nearly half of respondents (44 per cent) say that they had not felt in a position to be able to take a week or more of holiday during the last six months.
Ed Molyneux, CEO and co-founder of FreeAgent says that a major barrier for people thinking about starting a business can be the costs involved. ‘They think they’ll need to spend a lot of money from the outset on building the right infrastructure for their business, and the idea of applying for bank loans, grants or other financial assistance is very unappealing.
Self-funding over investment
‘But the reality is that the majority of UK micro-businesses don’t actually require this kind of investment from the outset. We’ve found that most of them are either self-funding through the business owner’s personal savings or simply don’t have any start-up costs, and that’s a trend that should give confidence to anyone contemplating self-employment.’
However, Molyneux adds that it’s important to bear in mind that actually running your own business can still be a tough reality. ‘Many people are only just making enough to cover their costs, or not covering them at all, and don’t even have the confidence to go on holiday.’
By understanding their finances more clearly, we believe they will be better placed to spot new opportunities to improve their cash flow and gain enough confidence to take a well-deserved break from their business.”
Further reading on freelancers
Looking for finance? SmallBusiness.co.uk is working in partnership with trusted lenders to find the best business funding deals. Find out more here.
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