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Do business directors borrow from their personal or business funds to solve financial trouble?


In a potentially tough financial period, business directors would not hesitate to borrow from their businesses or personal finances to survive, despite the potential risks to their financial security, new research has revealed.

A new study commissioned by comparison website Small Business Loans Australia found that 56% of Australian SME owners either have, or would, borrow funds from their businesses to solve personal financial issues, while 72% would use their personal savings or assets to support their businesses through tough financial periods or cash-flow problems. 

A higher proportion of small businesses (74%) have, or would, borrow from their businesses, compared with just 52% of medium-sized businesses and 50% of micro businesses.

Across the major states, more Victorian businesses (66%) have, or would, borrow from their businesses, followed by 62% of West Australian businesses, 54% of NSW, and 47% of both Queensland and South Australian businesses, the survey found.

Among those directors who would use their personal assets to aid their business, 34% would draw from their personal cash savings, 19% would draw equity from their property or take out a personal loan, 8% would use “other” personal finances, and 6% would sell their car or another high-value item.

Across the major states, 82% of Victorian businesses are prepared to use their personal finances to save their businesses, followed by 80% of South Australians, 70% of NSW directors, 67% of West Australians, and 62% of Queenslanders.

Across businesses of different sizes, 82% of small businesses would support their business with personal finances in some way. This was followed by 70% of micro businesses and 66% of medium-sized businesses.

“If business owners are needing financial assistance, taking out a secured or unsecured business loan is another option, and is less likely to risk a director’s personal assets,” said Alon Rajic (pictured), founder and managing director of Small Business Loans Australia. “To get the best interest rates or to avoid defaulting on payments, businesses should conduct thorough research into their loan serviceability capabilities in the medium term and the many loan options available.”

Would you borrow from your personal or business funds in a tough financial situation? We’d love to hear from you in the comments below. 

 

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