The blurring of personal & business finance

Research has found that almost 40 percent of Kiwi small businesses use personal savings to support operations. It’s a behaviour that can very quickly become problematic.

Personal and business finance is becoming increasingly blurred for small business owners, which may lead to difficulty accessing business finance as the lending criteria tightens.

Latest findings from a survey, commissioned by small business lending specialist Prospa, reveals that when a business needs money almost two in five (38 percent) of business owners will dip into their personal savings to support their business operations. It is a very common trend among businesses less than two-years old, with 64 percent of businesses stating that personal savings is their primary source of funding.

“This behaviour can be problematic,” warns Prospa Managing Director, Adrienne Begbie (pictured). “Small business owners need to be mindful when blurring the line between their personal and business affairs, as it can lead to issues later when funds are required to achieve personal or business goals.

“The current Credit Contract and Consumer Finance (CCCFA) regulations has resulted in a highly critical eye, analysing every personal expense for Kiwis seeking loans. This can have an unintended but direct impact on small businesses’ ability to access funds, as financial institutions observe funds extracted for the business or vice versa due to the mixing of personal and business finance,” says Begbie.

With 44 percent of those surveyed indicating they need additional finance to achieve their business goals, the restrictions from access to funds could cause increased frustrations for small business owners. It is more critical for businesses less than two-years old, with 66 percent indicating a need for additional funds.

“We get that cashflow is the lifeblood of any small business, and access to finance is really critical in today’s climate. With supply chain issues and labour shortages impacting every sector, many businesses are requiring funds to order additional stock or are wanting to capitalise on unexpected or immediate opportunities so they can grow. We want small business owners to know we’re in their corner and that there are alternatives to banks, here to support them in achieving their business goals and aspirations, whatever they may be,” says Begbie.  

“With all the challenges our small business community has faced over the last two years, applying for finance should be easy, accessible and based on the merits of the business. As we enter the start of a new financial year and our borders start to reopen, I hope our small businesses are feeling bullish and are more confident in growing their ventures.

“We sure know they deserve it,” says Begbie.

The survey was conducted online by One Picture between 27th January and 10th February 2022 amongst a sample of 525 small business owners in New Zealand with 1 to 50 employees.