A new survey has found that almost one-third of UK small businesses have received financial backing from a family member to help them get started.
An online survey conducted by Panelbase, on behalf of small business lender Iwoca, has found that 29% of small business owners in the UK have received financial backing from a member of their family - and three-quarters (74%) of them say the money was essential for setting up their business.
Over a third (36%) of business owners polled said they had received more than £25,000 from a relative. One in five (19%) had received more than £50,000. The findings also showed that:
- 19% received up to £5,000;
- 15% received between £5,001 and £10,000;
- 22% received between £10,001 and £25,000.
The findings indicate that parents and partners are the relatives most likely to offer financial support; however, siblings, grandparents and in-laws have also provided finance.
According to the research, 37% of business owners said they asked for financial support from a family member because they wanted to start a family business; 35% of entrepreneurs asked for funding because they needed the money urgently. Other reasons for asking family for money were:
- 16% said they couldn't afford loan repayments;
- 12% said they didn't know how to apply for finance;
- 12% either had their funding application rejected by a bank or the bank's financing terms didn't work for their business.
"Time and again data shows that the major banks are reducing their appetite to lend to small businesses, meaning they're increasingly having to look for finance elsewhere. This means families have also been filling the gap. From parents to grandparents to brothers and sisters, millions of small business owners are seeking the support of their families to help get their businesses off the ground." Mark Di-Toro, director at Iwoca.
Money issues can undoubtedly put a strain on family dynamics; however, while 9% of the small business owners polled said that their relationship with their relative had worsened due to becoming financially involved in their business, nearly half (47%) said it had led to a better relationship.
Even so, nearly half (47%) of small businesses predicted that they would prefer to go to a bank for financing in the future; a third (29%) said they would still opt to raise the money from family members.
Written by Rachel Miller.
