SMEs turn to personal credit cards to fund business

UK companies are using personal credit facilities for financing, research finds.

Personal credit facilities such as credit cards and personal loans have been used by one in eight (13 per cent) senior decision makers at small and medium-sized enterprises (SMEs) in the UK for financing their firm over the past 12 months, according to a study by Santander Corporate & Commercial.

The SME Access to Finance study of 683 senior decision makers at UK businesses also finds that one in four (25 per cent) have also relied on overdraft facilities over the past year.

This is especially common in the North East where 26 per cent of SMEs said they had used personal credit facilities as financing for their businesses; more than double the national average.

The survey also finds a number of firms (8 per cent) that also admit they had never reviewed their finance requirements with a view to financial stability or to assess how much money is required to execute new projects.

More than two fifths (43 per cent) of businesses say they are concerned or very concerned about cash flow over the next 12 months.

The biggest problem, experienced by a quarter (25 per cent) of SMEs, is late and failed payments from customers but, despite this, just 5 per cent say they had used invoice financing in the past 12 months.

Cash flow worries are most prevalent in London, where nearly two fifths (38 per cent) of business managers are either concerned or very concerned about their cash flow in the next 12 months.

Mike Reeves, joint managing director of SME Banking at Santander says, ‘It’s worrying to see that many of Britain’s small firms are relying on personal credit facilities to finance their businesses, and are concerned over effectively managing cash flow. 

‘If businesses are experiencing problems with late or failed payments, then the simple answer is invoice finance. It’s a tried-and-tested method of unlocking the value of unpaid invoices, providing companies with immediate access to their money.’

Further reading on cash flow

Ben Lobel

Delphine Hintz

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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