A quarter of small and medium-sized firms are supporting their businesses with personal savings and handouts from family and friends, a report claimed today.
Business funding specialist Bibby Financial Services, which commissioned the research, said the reliance on personal finance prevented firms from being able to take advantage of the first stage of economic recovery.
The survey revealed that almost half of small and medium-sized enterprises (SMEs) used just one source of funding, with 20% of firms saying they relied on a bank overdraft and the same amount again using a bank loan.
David Postings, UK chief executive at Bibby Financial Services, said many business owners turned to those closest to them for financial support because they were not aware of the range of options available to them.
He added: "Businesses with unsustainable or limited sources of finance in place will find it challenging in the months and years to come if they cannot take advantage of the gradually improving trading conditions in the UK."
Mr Postings said the survey of 1,000 SMEs highlighted the value of the alternative finance market.
According to the Asset Based Finance Association, its members advanced £17.4 billion to businesses in the third quarter of the year - an increase of 6% on a year earlier.