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Two thirds of SMEs relying on personal finance to fund business

Alarming figures have shown that one in five owners regularly dip into their own pockets to fund their business, while almost half do so occasionally, prompting calls for SMEs to seek better funding options.

Professional Development Mitchell Turner 18 March 2016
— 1 minute read

Scottish Pacific’s latest SME Growth Index, a twice yearly examination of the concerns of more than 1,200 Australian SME owners and CEOs, has revealed that the number of SMEs resorting to personal finances (namely credit cards with high interest charges) has ballooned to 65.4 per cent.


According to the results of the survey, only 10 per cent of SME owners had never settled business expenses using non-business sources.

Scottish Pacific CEO Peter Langham said the findings on personal credit card use posed significant concerns.

"How SMEs are funded has a significant bearing on operations, from how well they can manage cash flow to the pace at which they can expand. It’s crucial to get it right and not think too short term,” Mr Langham said.

“Personal finance may appeal from a convenience, speed and accessibility perspective – the downside is that higher than necessary funding costs cut directly into margin, and personal financing can impact on lifestyle and leave owners open to family conflict which can destabilise the business,” he added.

Mr Langham revealed a disturbing trend among SME owners: a willingness to pay higher rates to obtain finance if it means they can avoid having to provide real estate as security.

“This reflects a growing awareness amongst SME owners that putting the house on the line is no longer a given and suggests openness to alternative, innovative funding solutions such as trade and debtor finance,” Mr Langham concluded.

Two thirds of SMEs relying on personal finance to fund business
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Professional Development