Nearly half of SME owners are using unprotected loans to fund their business, according to research from Old Mutual Wealth
A poll of 250 small and medium-sized business owners revealed that 48% have unprotected loans or debts that could put their personal financial wellbeing at risk should something go wrong, like Brexit plans or the coronavirus crisis.
The majority (60.2%) of owners have also used a percentage of their own personal savings to help fund the business, making them even more vulnerable if things don’t turn out as planned.
Paul Roberts, head of protection at Old Mutual Wealth, said:
“With the rise of the gig economy, more people are becoming self-employed and starting new companies and therefore the role of business protection has never been so important.
Small business owners in particular should speak to a financial adviser, plan their ‘business will’ carefully and take time to investigate the full range of protection options available to them.”
These findings followed the release of a quarterly survey by the Federation of Small Businesses (FSB), which reported low confidence among small businesses at the end of 2017 compared to the same period in 2016.
In December 2019, confidence fell to an eight-year low, standing at -26.6, with 46% of SMEs expecting their performance to worsen in the first three months of 2020. Little did they know what was to come.
SMEs Unprepared for Coronavirus Crisis
Many SME owners will have experienced great financial losses as a result of the coronavirus pandemic as so many were unprepared for a global pandemic.
Mike Cherry, chairman of the FSB, said:
“The costs businesses face when their supply chains are impacted can be severe and therefore we stress the importance of planning for the future.”
Unfortunately, this lack of preparation meant that when the coronavirus pandemic hit, many small businesses were negatively impacted and some may never recover financially, particularly as many businesses were funded by personal savings.
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