2012: 1 of the toughest years to keep a business afloat

Over a third of SME owners have had to invest additional personal funds from their own savings this year, research by personal asset lender borro revealed.

Not only have SMEs had to dip into their personal savings, one in ten have taken out short-term loans in the last 12 months in order to assist with business cash flow.

2012 has taken its toll on small to medium-sized businesses in the UK. The average capital needed to get a business going is now at £94,000. Companies that have needed to take out a loan to start their businesses this year have had a higher average start-up cost of £127,992, of which they have borrowed £84,500 – 66 per cent of the total cost. Among the businesses that used a loan to help cover part of their start-up costs, 42 per cent have had to take on additional bank loans after the business was launched.

Small companies and start-ups are not the only ones who have to dip into their personal savings to stay in business, the figures reveal. Some 40 per cent of mid-sized businesses have had to invest additional personal funds this year.

These numbers are released only weeks after the Enterprise Ladder report, which revealed just how much the last five years have seen the UK’s small business owners struggle to keep their heads above water. 46 per cent of all small business owners have seriously considered either selling their business or closing it down completely. Two fifths of respondents to the Enterprise Ladder report said they would be unlikely to start their business again today, describing 2012 as a much more difficult year to start a business than 2011.

If we believe these numbers it comes as no surprise that business owners have had to take out loans or dip into their own pockets. Research revealed further that a quarter of business owners have seen their shareholding diluted as a result of taking on new investors or selling a share in their business, an issue that seems to increase with the size of a business. In the face of this struggle alternative finance is becoming more attractive.

“With 2012 perceived as being one of the toughest years yet to either launch a small business or keep one afloat, SME owners are increasingly having a look at alternative ways to secure the finance they need.,” commented Paul Aitken, CEO of borro. “Small businesses are at the heart of the UK economy and need to be provided with quick secure lending facilities.”

While these numbers show that it has been difficult to keep a business afloat this year, other research proved that more than 90 per cent of Britain’s SMEs are expecting growth. Despite the struggle, optimism stays high. As John Antunes, director SME & Channels at SAP UKI told Real Business, SMEs have adapted to the economic situation and are ready to take the challenges into their own hands.

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