Everline and ezbob COO Russell Gould on bank lending, friends and family funds, and why there is a need for flexible funding alternatives

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Would you top up your businesses working capital with money from friends and family? If the answer’s yes, you wouldn’t be alone as close to a third of the finance borrowed by small business decision makers comes from those they hold dearest.

And it often only takes a small injection of cash for a business likes yours to build its brand, hire somebody to share the workload, or improve the company’s infrastructure to deal with more orders.

It’s the kind of short-term gap filling that goes on up and down the country and, despite what some may assume, banks only account for 53% of the finance borrowed by small businesses.

This is according to independent survey of 1,000 small business decision makers from Opinium Research, commissioned by digital lender to small firms Everline and Ezebob.

We were keen to identify and highlight some of the common trends relating to managing cashflow and access to working capital, both hugely important issues for small firms.

Given the likelihood that borrowing from friends and family can often put relationships under some strain, it’s somewhat surprising that so many rely on the people closest to them, as well as their own personal savings.

Changing face of finance

One of the issues the survey identified was the sense that banks don’t necessarily understand the changing challenges that small businesses face, something more than two-thirds of respondents stated.

Instead, more are turning to alternatives, but may not be fully aware of the range of options available to them. 67% of small business managers said that banks’ services, products and/or behaviours have not evolved sufficiently to support small and medium sized businesses in the last three years.

There was an expectation among business owners that securing a business loan will take seven days. This is despite the accelerating speed of business driven by the web.

And there’s definitely a need for speed. Just under half of the 1,000 businesses said they experience cashflow problems each year – with 27% going through some form of cashflow crunch at least once a quarter.

This serves to highlight the need for better financial support for small businesses. Fast and convenient access to cash was deemed to be more important now by more than half (55%) of respondents – in contrast just 2% felt this was less important.

Access to working capital

Without better access to working capital for small business decision makers, the likely effect on performance is decidedly negative, 68% of those questioned felt. And it is slow decisions that 40% felt have a poor impact on growth.

So what would an extra £50,000 do to change matters? The majority, 57%, said they would use it to grow and develop their business by upgrading tools and equipment, employing more staff and investing in marketing, for example.

As a business, providing a service for companies to secure small business loans without having to wait a week is the model we’re built around. And, as Opinium Research’s survey suggests, being able to access a small cash injection in a matter of hours can make a big difference to many firms.

Endless paperwork and meetings hold back businesses at critical times, so speed and flexibility can be crucial. If you can complete an application in 10 minutes and have money in your account half an hour later it could make the difference between a disgruntled or happy supplier, for example.

Whether for limited companies, limited liability partnerships or sole traders looking to access sums of up to £120,000 over a period of one to 15 months we’re looking to make the process easier and don’t charge fees for repaying early.

Russell Gould is the COO of the digital lenders to small businesses Everline and ezbob.