Mar 12, 2013

Industry news - More than one way to finance a business

Many businesses are using inadequate finance options to start and then maintain their enterprise, reports.

New research from the University of Surrey found that small business owners take an unnecessarily linear approach to their funding options, with many only using one method to start up their companies.

The study of 1,000 business owners found that 58 per cent of business owners use just one method of finance to get their business off the ground. Then, once established, 42 per cent said they use only one finance method to keep afloat.

Personal savings, re-investing profits and top-ups from family members were seen as the most popular funding tools for small businesses - despite researchers from the university noting how these options are "often inadequate" for the needs of a growing business.

The results aren't the first time small business owners were found to be ignorant of their finance options. Research by Experian found that owners were not aware of such options as invoice finance, which could provide loans against as-yet unpaid invoices.

Speaking of the results, the University of Surrey's Professor David Gray explained: "We found that SMEs mostly borrow from family or friends or reinvest retained profits, but these sources are often inadequate for the growth needs of businesses.

"Our research shows that banks come a poor third in terms of finance sources, which is disappointing given that the UK is considered to be a market economy

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