Micro-businesses “resorting to payday loans“
EN for business, 14 Mar 2013
One in six micro-business owners have used payday loans to fund their ventures, new research shows.
According to a report from Amigo Loans, just 20 per cent of micro-businesses were funded through a bank loan, while 13 per cent had to borrow from friends or family. This is despite the fact that, on average, micro-businesses need just £2,143 to set up.
One in five owners whose business failed believe it was because they were unable to get a bank loan and just ten per cent were able to secure funding from a bank in their first year of trading.
James Benamor, founder of Amigo Loans, said, “Banks have forgotten why they exist. It's scandalous that, despite billions of pounds worth of taxpayers' money being given to them, they're not lending to these entrepreneurs who are the lifeblood of our economy.
“For many small business owners, once they're turned down by their bank they'll have to try and find the money elsewhere or resort to extreme measures such as taking out a payday loan.“
Twenty-five per cent of micro-business owners said that they would need extra funding in order to expand but just ten per cent think their bank will provide the cash to do just that.
Benamor said that greater awareness of alternative funding is required, whether it be crowd funding, peer-to-peer or guarantor loans.
However, Neeta Patel, chief executive of the New Entrepreneurs Foundation, said that entrepreneurs need support as well as funding to ensure they create and maintain a successful, profitable business.
“We believe there is a strong need to support enterprise from the ground up at a local and national level. With a tough economic climate, it is small businesses that will ultimately have to bring prosperity, drive innovation, attract investment and create jobs, so it is essential the UK cultivates an environment where enterprise can thrive, with the right support and encouragement,“ she added.
By Kirsty Hewitt