Nearly three-quarters of SMEs use personal finances to fund business growth, study finds

71% of small and medium sized enterprise (SME) owners have resorted to using a form of personal finance to fund their business, the latest study from Shawbrook has revealed.

Among those surveyed by Shawbrook, over half admitted to using personal credit cards (54%) or savings (53%), with 39% even saying they had used a personal loan to fund their business.

Compared to Shawbrook’s research from last year, the percentage of those resorting to personal savings for business purposes has increased by 15%, personal credit cards by 13%, and personal loans by 8%. 

Perhaps most concerningly, even those on the larger side of the SME scale are using their personal finances to fund their business, with 55% of those working at a business with 100 to 249 employees using their personal credit card, 49% using personal savings and 42% using a personal loan.

However, encouragingly SMEs are also considering other forms of finances to support their ambitions.

The research also revealed a huge 78% accessing alternative finance, increasing from 73% in 2023, as businesses look for new ways of funding growth. Indeed, we found more decision-makers reportedly using products such as invoice finance (56%, up from 48%), asset finance (47%, up from 43%), asset-based loans (39%, up from 38%) and commercial loan facilities (45%, up from 44%) this year compared to 2023. 

Nearly three-quarters of business leaders (73%) are reportedly concerned about the rising cost of running their business this year, which also came out as the top concern in last year’s research (69%).

Our findings make clear that many business leaders are still feeling the effects of, and contending with, the ongoing difficult landscape, and looking at all options to finance their growth. 

Neil Rudge, chief banking officer for commercial at Shawbrook, said: “While it’s concerning to see an increase in the number of people dipping into their personal finances to fund business growth, it is positive to also see an increase in those accessing alternative finance as well. 

“SMEs are undoubtedly the backbone of the UK economy, making up 99.9% of all businesses in the UK, accounting for three-fifths of the employment and around half of turnover in the UK private sector.

“As the Government looks to get the economy back on track, it’s crucial that this cohort is not left behind. 

“The uptick seen in those utilising alternative forms of finance is an indicator that we are heading in the right direction, with more SMEs finding solutions through specialist providers.

“SME finance can be sophisticated and complex, so working with a specialist lender that has the experience and resources to offer a high level of service and bespoke packages will ensure businesses can find the right finance for their plans.” 

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