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Businesses Raise Finance From Friends and Family

More small businesses are seeking financial help from friends and family according to a recent publication by the Office for National Statistics.
The report entitled "Access to Finance 2007 and 2010" was released earlier this week and surveys small businesses across more than 20 EU countries.

Covering the period between the start of the recession and last year, the main findings of the report included:

  • 35 per cent of small and medium-sized businesses sought finance in 2007. This rose to 42 per cent in 2010.
  • For those seeking loan finance, around three-quarters of businesses approached banks.
  • In 2007, successful loan finance approaches to banks were around 90 per cent. This fell to 65 per cent in 2010.
  • Five out of every six businesses that expect to need future finance anticipate seeking it from banks.

Businesses who attempted to source finance from owners and banks are experiencing lower success rates. On the flip side, businesses are becoming more creative and sourcing finance from local sources.

The number of businesses who succeeded in raising finance from employees of the business, family or friends and other businesses all rose, highlighting the growth of community-based funding.

The reasons businesses failed to secure finance from banks all diverged from the standard excuses which included poor loan history; risky business proposal; insufficient collateral; poor credit rating or lack of own capital. This indicates the downturn in the economy is responsible for finance applications failing.

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