Quarter of SME directors use personal finance to support their business
1 min read
21 November 2013
More than a third of SME directors has used personal sources of finance, including mortgages and credit cards, to fund their their business, according to research released by Experian.
The survey of 600 SMEs found that almost one third of those who used personal finance had used a mortgage to fund their business – thereby putting their home at risk – and 47 per cent had used personal credit cards.
Two thirds have drawn money from personal current accounts and nearly half had used personal savings.
Ade Potts, Managing Director, Experian’s SME business, UK&I, said: “This research shows that SMEs are becoming increasingly resourceful when it comes to funding and are using a variety of different financing options that are available to them to set up or expand.”
When asked what they were using the money for:
- 48 per cent said to set up their business;
- 37 per cent to invest in new equipment or premises;
- 30 per cent to pay suppliers; and
- 26 per cent to clear off debt
Potts continued: “However, there are some key factors that SME Directors should consider before using personal finance sources. Although it might initially seem like using personal funds for business purposes is the easiest route, it can affect personal credit records and leave them vulnerable, particularly when you consider people are using their homes as security.”