Business owners are putting their fund-raising plans on their personal credit cards for 2014, according to new research from rebuildingsociety.com.
Its study shows nearly two out of five (37 percent) of business owners planning to borrow money or raise additional capital outside of traditional bank borrowing in the next year will use their personal credit cards to raise money. This compares with 12 percent that are looking to use P2P lending.
In total around 290,0002 SME owners will use their personal cards to raise cash with approximately 150,000 taking money out of personal savings. Similar numbers will be borrowing from friends and family in order to fund business expansion. Around 50,000 SME owners are remortgaging their own home while another 50,000 plan to sell their home or sell a second home.
However, the research by rebuildingsociety.com shows using personal credit cards – where standard APRs for cash withdrawals can be as high as 29.9 percent – are the most popular form of personal borrowing methods. Using credit cards for long-term borrowing will also mean interest charges mounting up if business owners only make minimum monthly payments on their debts.
Its research shows SME owners are committing large sums of their own cash to businesses – around 56 percent of owners have invested some of their own cash in their business either to finance debt or support growth in the past year.
The average amount invested is around £22,700 – although the median amount that owners have invested is less than £10,000 in the past 12 months.