17% of SME owners have turned to payday loans

New findings show that about 17% of small business owners have at some time in the past used payday loans to finance their companies. Amigo Loans, a loan guarantor company, revealed that an average micro enterprise needs £2,143 to successfully set up, but a huge number of them struggle a lot to find finances with only 20% receiving funding via bank loans.

25% of the 200 micro-enterprises interviewed during the survey said that they required more funds to aid them in expanding their businesses with only 10% saying that they were certain that they would get financing from their banks and 14% claiming that they would have to use credit cards or overdrafts.

Amigo Loans’ CEO and founder James Benamor said that banks has forgotten the reason for their existence and that it was scandalous that even though billions of tax payers’ money had been given to the banks, they were not willing to loan them out to small business owners who were the life blood of the country’s economy.

He added that a number of small enterprise owners who were turned down by their respective banks had to find other alternative sources to finance their businesses which included taking out payday loans.

Benamor continued to say that for the situation to change, small business owners had to be sensitised on other available viable options such as crowd or peer-to-peer funding and guarantor loans so that the former do not resort to risky sources of funding.