One in seven small- and medium-sized enterprises (SMEs) are using personal savings for immediate financial support during Covid-19, new research has found.
A survey commissioned by alternative business lender Nucleus Commercial Finance revealed that two fifths (44 per cent) of SMEs said they have been negatively impacted by coronavirus and the subsequent lockdown.
They have either applied for or considered seeking additional financial support.
Of this group, 13 per cent have extended an existing loan/finance facility, 12 per cent have already taken out a new loan or finance facility, 11 per cent are considering applying for one and seven per cent have already.
Only 25 per cent of SMEs have avoided taking the option of using personal savings as they already had enough cash in the bank to survive the crisis.
503 SME senior decision makers were surveyed between 7 and 12 May.
“As the economic impact of the pandemic becomes clearer, it is alarming that SME owners continue to use personal savings to support their business,” said Chirag Shah, chief executive of Nucleus Commercial Finance.
“While some owners might believe that this is the best option for short-term cashflow 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.
“Entrepreneurs should know and be reassured that there are flexible finance options available; we have already approved more than £100m in funding to SMEs since the coronavirus outbreak, providing both short and long-term facilities to ensure they have the financial support to get through this challenging time.”