Finance · 29 September 2015

How much money do entrepreneurs need to get their businesses up and running?

The vast majority of entrepreneurs started up their business using their own savings
The vast majority of entrepreneurs started up their business using their own savings
The perils of cash flow and access to finance are well-known to all new businesses, but a study by startup community Shell LiveWire has found that many entrepreneurs manage to get their firms up and running by bootstrapping effectively.

Of the 241 entrepreneurs who responded to the survey, over a quarter said they spent less than 1, 000 in the first year of launching their business, while 24 per cent spent less than 5, 000. Only 6.7 per cent spent more than 100, 000.

Nearly three quarters of respondents said they used savings in order to fund their startup, while 30 per cent had borrowed from friends and family again reflecting the importance of relatives to most micro businesses. A?report earlier this year from Lloyds Bank Insurance found two thirds of the UK’s small firms relied on support from friends and family in some shape or form, in order to run their business.

Interestingly, while bank loans are often viewed as the go-to option for new businesses looking for funding, it seems the increasing number of alternative options may be taking effect, as just ten per cent of entrepreneurs said they had taken out a bank loan to finance their business.

Challenger banks like Metro Bank, Aldermore and OakNorth aim to fill the gaps left by the big banks. Oaknorth, which began lending this summer, hopes toprovide for new and small businesses, which are often refused loans, required security against property or been served at a glacial pace? according to OakNorth CEO RishI Khosla.

Of the other respondents, five per cent raised money from crowdfunding or remortgaging their home.

A report last year from Experian found those starting businesses for the first time camefrom a range of backgrounds a third of them had a household income of less than 25, 000 a year, while 7.7 per cent of business owners lived in social housing, double the figure for 2009.


 
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ABOUT THE EXPERT

Rebecca is a reporter for Business Advice. Prior to this, she worked with a range of tech, advertising, media and digital clients at Propeller PR and did freelance work for The Telegraph.

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