smallbusiness.co.uk: Helping your business think big

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.’

Ben Taylor, co-founder of events promotion platform Fatsoma, was given £25,000 of funding from his father who also secured his £15,000 bank loan.

He says: ‘We would have done it more quickly with a large-scale investment but this way we’ve built it up from the ground and been a lot more efficient. That’s made us much better business people. We’ve still wasted time, but you really know the product.

‘We’re all very happy that my dad is involved, we know how difficult it was in the early days to get people to believe in the business and to get the banks even to meet us.’

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

Of the 480 SmallBusiness.co.uk respondents, 12 per cent said they would rather borrow from business angels, with six per cent saying they would ask friends. Only three per cent said they would opt for venture capital investment.

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