The coronavirus pandemic is leading small business owners to take drastic steps to keep their companies afloat, according to a new survey, with one in seven small business owners digging into their own pockets to ensure their business survives.
Small and medium sized businesses (SMEs) in the UK have come under intense pressure during the Covid-19 crisis, with a recent poll finding that two fifths of small businesses were at risk of shutting down permanently.
Some 14 per cent of SMEs owners have used their personal savings for immediate financial support during the pandemic, according to a survey conducted by Opinium for Nucleus Commercial Finance.
Of the 503 business-owners surveyed, 44 per cent said that their companies had been negatively impacted by coronavirus and the subsequent lockdown.
A quarter of this group have already extended an existing loan or finance facility or have already taken out a new one, while seven per cent have applied for additional financing.
The government introduced the so-called bounce back loan scheme after facing criticism that its Coronavirus Business Interruption Loans were not accessible to smaller firms.
The bounce back scheme offers 100 per cent government-backed loans of up to £50,000 to small businesses, and has so far paid out £23.8bn to almost 800,000 SMEs.
But UK lenders have reportedly warned that up to half of the bounce back loans may never be repaid.
Laura-Louise Cottle put £2,400 of her personal savings into her business after the cancellation of events and festivals due to Covid-19 “nearly stopped sales” at her festival fashion brand, Wolf Rayet.
“I wanted to make a quick decision and decided that using my own savings was the best option, as I wanted to avoid future debts that the company might not survive,” Cottle told City A.M.
“There are so many options from the government and lenders, but that felt quite overwhelming so I decided this was the best route.”
Cottle says her approach seems to have worked and has “kept my company going”. She has used the money from her savings to invest in advertising and product development.
But Chirag Shah, chief executive of Nucleus Commercial Finance, said it was “alarming” that SME owners were restoring to using their own savings.
“While some owners might believe that this is the best option for short-term cash flow needs, taking this measure can have a detrimental effect on the business and also their personal situation, especially if activity does not improve immediately once lockdown measures are eased.”