You’re probably tired of hearing people say that it’s tough out there at the moment – but it’s true. Our beleaguered economic times are very tricky for great swathes of the population; from first time house buyers to those hoping to retire in the next 300 years, everyone’s feeling the pinch of a post-boom bust. For aspiring entrepreneurs dreaming of starting their own business, this is not the ideal economy to launch into.
A recent poll by freelance marketplace People Per Hour demonstrates just how difficult it is. Surveying 5000 small business owners, the poll revealed that a paltry 3% of start up businesses were able to fund their new enterprises with a bank loan. Some used alternative business loans from lenders like everline, others used their redundancy package but the majority had no option but to use their own personal savings. It really is a case of make or break.
What’s the problem?
So why are so many new small businesses failing to access affordable finance under a government who claim that they are ‘open for business’? The Con-Lib coalition may claim that they are backing business, but they are yet to take effective steps towards helping SMEs who contribute more than 50% of the UK’s GDP and over half of the private sector’s jobs.
The FLS (Funding for Lending Scheme) was implemented to help a range of people to access affordable finance by making it cheaper for banks to lend, yet the majority of finance made available by this state-funded scheme has gone to help first time home buyers shoulder a mortgage. Banks are still not comfortable lending to riskier start ups.
And what about all that red tape Mr Cameron was talking about cutting a year or two ago? Businesses are still struggling to grow under the constant bind of rules and regulations. Yet we’re living in exciting times – huge numbers of new businesses are registering every day – just look at these figures from Companies House.
So what’s the solution?
Despite issues sourcing finance, it has never been easier or more affordable to start a business. The accessibility of the web and the effectiveness of working virtually mean that all a business really needs to get going is an idea and an internet connection. Yet, from this point it can be difficult to grow without available funds to invest in stock, staff, infrastructure – whatever each unique business needs. This is the stage at which, traditionally a bank business loan would be sought. Without this option 76% of entrepreneurs use their personal savings, while 20% borrow money from friends and family.
Yet there are other, less conventional ways to fund a start up and, once again, the internet can be a new business’s best friend. Crowdfunding, online social lending, finding a business angels – there are a huge number of options out there to help small business source capital and get growing.
Business loans from banks may be on ice for now but, in an age of online opportunity, smart businesses can still find new paths to entrepreneurial success. Isn’t that what it’s all about?
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