Entrepreneurs plug funding gap with ?7.2bn from friends and family

The finding comes from peer-to-peer (P2P) lender ThinCats, which discovered that 1.6 million Brits have lent capital to friends and family members to help them leap the ?4bn funding gap plaguing the UK at present.

In fact, some ?4,479 is lent on average to generate a funding gap fight with around ?7.2bn of investment from loved ones.

According to the report, parents are most likely to bridge the funding gap. People aged over 55 are around three times as likely to make a loan than any younger age group, while one in 20 has participated in a family and friends round.

Kevin Caley, founder and chairman of ThinCats, said: ?Since the financial crisis in 2008, SMEs have had a pretty torrid time sourcing finance from traditional avenues, so it?s inevitable that some business owners are turning to friends and family for help.

?However, this sort of lending comes with all sorts of personal and emotional baggage, and it?s important that anyone in this position knows there is a healthy alternative finance market out there, with greater flexibility to lend when the banks will not.?

The company noted that banks turned down 26 per cent of some 324,000 loan applications that SMEs made in 2015, adding to the business funding gap woes that family members are helping to plug.

Meanwhile, alternative finance is also providing entrepreneurs with funding support and has lent ?3.4bn since 2014. ThinCats expects that this figure will grow as a government programme rolls out to insist banks that cannot help businesses redirect them to alternative finance providers.

?The good news is, this tightening of lending from banks has encouraged us to become a nation of peer to peer lenders, giving everyday investors the opportunity to make healthy returns through the emergent alternative finance sector,? added Caley.

?Over 160,000 people have already lent money through a peer to peer platform, and based on the 1.6 million already doing so through loved ones, we could well see many more.?

Image: Shutterstock

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