Personal Savings is the Preferred Source of Finance For Home Businesses
New research from Direct Line for Business reveals that 39 per cent of businesses from home have dipped into personal savings, to fund short term cash requirements for their business.
- Personal savings, credit cards and family and friends preferred over loans
- Personal savings the most popular source of start-up funding for home businesses
- Only three per cent of home-based start-ups have taken advantage of government grants
London, 19th November 2014: New research from Direct Line for Business1 reveals that 39 per cent of businesses from home have dipped into personal savings, to fund short term cash requirements for their business.
When it comes to funding, a quarter (28 per cent) have relied on friends, family and their partner, whilst one in five (22 per cent) have even resorted to using their credit cards to help with short term cash flow requirements. Only one in 10 (13 per cent) of home businesses have taken out a loan to fund their ongoing operations.
A similar theme appears when analysing initial start-up funding for home businesses, where personal savings are again the favoured source of finance, with almost two-thirds (63 per cent) of home businesses choosing this option. Only three per cent of home-based start-ups have taken advantage of government grants.
Family is important to the initial funding phase for small businesses, with 15 per cent of owners being supported early on by their partner and six per cent depending on a ‘family round’ of finance.
The survey also revealed only six per cent take on a loan to start up their business, the same percentage as those who used a credit card to get their business up and running.
Jazz Gakhal, head of Direct Line for Business commented: “Many people starting a home business do not even consider investigating traditional bank funding options. Owners of businesses often need relatively little start-up capital, so turn to those around them for help.
“Home businesses should actively research the sources of funding available to them, while initial funding from friends, family and using personal savings can help a business get off the ground it is not a sustainable source of finance to efficiently grow a business.
“Relying on a friends and family network for finance can have the added pressure of not wanting to let down those that are close to you. As such, it is very important that home businesses protect this investment and help put personal worries to rest too, through having the right insurance in place.
“It would be a shame if their investment in an otherwise promising enterprise was lost as a result of something easily insurable such as loss of stock through fire or flooding.”
Yasmina Siadatan, Entrepreneur and winner of the fifth series of The Apprentice said: “Banks are no longer the only source of finance for businesses. There are lots of alternative options, from crowd funding, Start Up Loans and P2P lending to the more left field options such as speed funding events.
“It’s also worth taking advice from business networking groups and local authorities about potential finance options. You may find public and private institutions including universities offering grants and loans to businesses that can display potential.”
For more information on Direct Line for Business Home Business Insurance visit: http://www.directlineforbusiness.co.uk/small-business-insurance/home-business-insurance/
Notes to editors
1 Research conducted by Consumer Intelligence among a representative sample of 273 UK home businesses between 18th September and 2nd Oct 2014
Direct Line for Business
Launched in 2007 Direct Line for Business provides a range of insurance products for the small business sector direct by phone or on-line.
Direct Line for Business insurance policies are underwritten by U K Insurance Limited, Registered office: The Wharf, Neville Street, Leeds LS1 4AZ. Registered in England and Wales No 1179980. U K Insurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Direct Line for Business and U K Insurance limited are both part of Direct Line Insurance Group plc.