Small business owners put homes on the line
A survey from personal asset lender borrow also showed that another third of small businesses (33%) would consider using their home as a guarantee if they couldn't get any other kind of finance to help with issues such as cash flow problems, late payments from customers, tax bills and staff wages.
The analysis goes on to reveal that the number of small business owners considering using a secured loan to get the capital they need to continue growing is now at the same level as those considering using an unsecured loan (38%) and an overdraft facility from their bank (33%).
Risky stepsPaul Aitken, chief executive of borro, says: "Using your family home as a guarantee for a loan is a huge step for a small business owner and can be risky in this uncertain economic climate but it seems many feel they have no other choice. It's surprising to see that as many small business owners would consider applying for a secured loan as would apply for an unsecured loan or an overdraft, a sign that as banks continue to make it hard to access unsecured lending facilities, so those that require property as security become the next thing to turn to."
With nearly a quarter of all small businesses saying they have missed out on opportunities to expand their business due to lack of finance, it is not surprising that over two thirds of SMEs believe that banks should relax their lending criteria. Borro interviewed 300 owners and directors of small businesses for the survey.
With confidence in banks still at an all-time low, small business owners have had to turn to their personal funds to boost their businesses. Over half (57%) have used their own funds to inject capital into their business and 17% have asked friends and family for additional money.
Aitken added: "Loans and overdrafts from a bank aren't the only options open to small businesses today. The lending marketing has opened right up. Our analysis shows that small business owners are looking further afield to get the funding they need. A quarter of small businesses (26%) said they have used or would consider using their personal assets and possessions such as cars, jewellery, fine art and antiques to secure a loan for their business. The majority of borro's customers are now SME owners and we have seen a huge increase in this trend over the last year."