1.6 million Brits helping to bridge funding gap, research shows
Over 1.6 million Brits have helped to bridge the funding gap by lending money to their friends and family to enable them to start a business, according to research by ThinCats, a peer-to-peer lender.
The research found that entrepreneurs are being given £4,479 on average to help them to set up their business, with a total of £7.2 billion being lent directly from family and friends.
The study suggested that older people such as parents are more likely to provide support for their loved ones, with those aged over 55 being found to be three times as likely to give money as those in lower age groups.
The research suggests that more entrepreneurs are turning to their family and friends for support as a result of financial pressures. Over 25 per cent of 324,000 applications for loans made by small and medium-sized businesses were turned down in 2015, resulting in a £4 billion funding gap.
Entrepreneurs are also being provided with financial support from the alternative finance sector, particularly peer-to-peer lending platforms, with a total of £3.4 billion being lent to UK businesses since 2014.
ThinCats Founder and Chairman Kevin Caley commented that since the 2008 financial crisis, small and medium-sized businesses have had a difficult time obtaining finance from traditional outlets, so it’s expected that some business owners are turning to relatives and friends for assistance.
“However, this sort of lending comes with all sorts of personal and emotional baggage, and it’s important that anyone in this position knows there is a healthy alternative finance market out there, with greater flexibility to lend when the banks will not,” he said.