Entrepreneurs Facing £94k Capital Cost for Start-ups
Cost for new SMEs is high, with quarter of current entrepreneurs looking to quit
As first time entrepreneurs continue to find it increasingly difficult to secure investment and cashflow-relief from banks, a survey has revealed that entrepreneurs launching companies in 2012 will require an average start-up capital of £94,000 to get their project off the ground.
Research from lending company, Borro’s Enterprise Ladder Report also revealed in addition to the £94k capital it’s likely that further liquid assets will be required after initial launch in the forms of short-term loans and additional bank loans. In the past 12 months over a third of SMEs have had to invest both personal funds, whilst one in ten have also had to seek out short-term loans to alleviate cash flow problems within their business.
Loans have proved to be a necessity for many to achieve a successful launch of a new business, with reports of costs upwards of £127,992 when £84,500 was borrowed – 66 per cent of the initial capital used. Furthermore, 42 per cent have been obligated to take on additional bank loans post-launch.
Paul Aitken, CEO of borro, said “The UK’s slump into a double-dip recession has not only affected how small business owners perceive starting a new company but our research has also found how many SMEs have had to either take out a loan or dip into their savings only to see that their shareholding has been diluted. It is a real worry to see that the future outlook and struggle that SME’s are going through is so grim.”
With reports that nearly a fifth of SMEs said they were very likely to exit their business in the next five years, with a further 26 per cent stating they were quite likely to exit, it come as no surprise that 46 per cent of SMEs said it would be harder to start a business this year than last.
Paul Aitken adds: “With 2012 perceived as being one of the toughest years yet to either launch a small business or keep one afloat, SME owners are increasingly having a look at alternative ways to secure the finance they need. Small businesses are at the heart of the UK economy and need to be provided with quick secure lending facilities. At borro, it comes as little surprise that small business owners represent 60 per cent of the growing client base.”