Small businesses prefer self-funding to finance from private investor

Small businesses prefer self-funding to finance from private investors.

In a poll conducted by SmallBusiness.co.uk, 31 per cent said they would rather be self-funded, with 25 per cent preferring to use bank loans and 17 per cent saying they would borrow from their family.

Maggie Andrews, inventor of hand support product Wrist Donut, used around £10,000 of her own money to fund her business.

She says: ‘I was thinking of getting some financial backing to push the company forward, but with all the reports of banks freezing overdrafts the thought just terrifies me now.

‘I have had some investment offers over the last few years, but at the moment, I prefer to be in control of the business myself.’

Kalpana Garung, founder of Himalyan Day Spa, sought a bank loan but was unable to get funding.

‘Me and my business partner put down £140,000 to set the company up. Part of which was my own savings and part was borrowed from friends and family.

‘I would have preferred to borrow from the bank as having to ask people I knew for money wasn’t easy. They didn’t all have it and we also had to ask other people. With a loan, it would have just been between me and the bank. It has worked out for the best, but the whole process was very stressful.’

A recent survey of 301 owner-managers conducted by financier Bibby Financial Services found that a third of small businesses are now using their own personal savings to ensure the existence of their enterprise.

Of the 526 SmallBusiness.co.uk respondents, 12 per cent said they would rather borrow from business angels, with five per cent saying they would ask friends. Only four per cent said they would opt for venture capital investment.