Click here to view your points.

Click here to refer more friends for more chance to win.

1.6 million Brits have lent money to a friend to start a business

Here we look at money saving when starting a business and putting cash in
By Ben Lobel on Dec 11th, 2016   @freelotteriesuk

More than 1.6 million people have lent money directly to a friend or family member to help them start or grow a business, according to research from online lender ThinCats.

With lending hard to come by, entrepreneurs are turning to loved ones for support, with an average sum of £4,479 being lent at a time.

At least £7.2 billion has changed hands in this way across the UK, as business owners rely on social networks to plug the lending gap.

The ThinCats study indicates that parents, who have the understanding and means to support their loved ones, are behind much of the family lending trend.

People aged over 55 are almost three times as likely to have made such a loan as any age group below them, with one in 20 having done so, suggesting much of the £7.2 billion total is down to parents giving their children a leg up with their business.

Financial pressure

This lending to friends and family members is understandable given the financial pressures on businesses. In 2015, banks turned down 26 per cent of the 324,000 loan applications made by businesses, with UK companies facing an annual funding shortage of close to £4 billion.

The alternative finance sector, in particular peer to peer business lending platforms, is helping to fill this funding gap, cutting out banks to provide greater reward for both borrower and lender. These platforms have lent £3.4 billion to British businesses since records began in 2014.

While still short of the £7.2 billion lent directly by friends and family, this figure is set to rise following a new government initiative launched recently. 

Kevin Caley, founder and chairman of ThinCats says that, since the financial crisis in 2008, businesses have had a pretty torrid time sourcing finance from traditional avenues, so it’s inevitable that some business owners are turning to friends and family for help.

'The good news is, this tightening of lending from banks has encouraged us to become a nation of peer to peer lenders, giving everyday investors the opportunity to make healthy returns through the emergent alternative finance sector.

'Over 160,000 people have already lent money through a peer to peer platform, and based on the 1.6 million already doing so through loved ones, we could well see many more.'