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A quarter (24 per cent) of owners of small- and medium-sized enterprises (SMEs) in financial difficulty over the past year have dipped into their own personal savings to address these issues, a new survey has found.

Alternative finance provider Nucleus Commercial Finance, who commissioned the research, said that nearly four in 10 (39 per cent) SMEs have encountered financial challenges over the past 12 months.

While a quarter of this group dipped into their personal savings, another 27 per cent took no action at all, rather than seeking the funds they needed from elsewhere.

“We often see that businesses face financial difficulties, however, what’s alarming is that SME owners are using personal savings to support their businesses, or even more worryingly, not taking any action at all,” said Chirag Shah, chief executive of Nucleus Commercial Finance.

“As we enter a new year, we encourage business owners to be more vigilant of their finances and be more aggressive when it comes to growing revenue.

“Entrepreneurs should rest assured that there are options available and as an industry, we should be educating them on the benefits of seeking external finance.

“Together we can help SMEs be better equipped to tackle any financial challenges; boosting performance and ultimately improving the country’s GDP.”

Small businesses with less than five employees were more likely to use personal savings to help their business (33 per cent) or to take no action at all (40 per cent).

In contrast, large companies were more likely to borrow from a high street bank (27 per cent) or an alternative lender (34 per cent), if they faced financial difficulties.

When asked which financial issues affected their business, impacts on margins due to price increases came first, with nearly half (48 per cent) of business owners selecting this option.

This was followed by unforeseen expenses such as broken equipment (42 per cent), late payments leaving the business short of cash (39 per cent), a drop in sales (38 per cent), the sudden loss of a major client (30 per cent) and loss of a crucial employee (27 per cent).

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