Small business’s running on credit cards

New research shows that small companies are now using their own resources to fund their organizations since they no longer are able to secure decent credit from banking institutions.

In a survey completed by the Scotland Federation of Small Businesses over a fifth of bosses were forced to turn to their own savings to make it through 2009.  Also shown in the survey was the fact that only a third of the SMEs actually used a bank overdraft in order to continue to finance their activities.

The FBS concluded from their study that Scottish firms needed better access to flexible and affordable bank credit.

Out of the 1,200 firms that were surveyed between the months of last September and October, about ten percent said they used personal credit, including credit cards, company credit, or a bank loan but over half of them did actually use these lines of credit during the month of October, which is when the base rate of the Bank of England fell to its lowest point ever.

About 33% reported that bank facilities had changed their interest rates with only about one out of six actually lowering their interest.

Out of the firms included in the FBS survey, only 30% saw an increase in their profits while 47% reported they saw their overall profits plummet.

In terms of expansion, 47% also reported that they planned to keep their business its current size until the recession passed with 32% stating that they planned on about a fifth of future expansion.