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Business owners turn to friends and family as bank lending falls

Family, friends and credit cards are now staple cash sources for many business owners as they continue to shun traditional bank finance.
According to the Institute of Directors’ survey of 1,226 of its members, just a third of business owners have turned to their bank for a loan in the past three years.

Some 55pc preferred to use retained earnings, with 15pc asking family or friends for funds, and 12pc using credit cards.
Four out of five business directors claim that it is too tough to obtain finance through traditional sources and fewer than half have attempted to apply for a bank loan or overdraft in the past three years. Of those who have applied for bank finance, 29pc were rejected.

Malcolm Small, senior financial services adviser at the IoD, which represents businesses of all sizes, said: “Businesses are plugging the funding gap by raising money from family or friends, or putting business expenditure on personal credit cards. This suggests an underlying need for day-to-day finance and serious cash flow problems for many businesses.”

Source The Telegraph

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