An increasing number of small business owners are enduring personal insolvency as a result of the lack of business funding, according to a new report.
Government figures have identified a jump in personal insolvencies during the first three quarters of 2009. Over 35,000 individuals went bust during that period - an increase of 28.2 per cent when compared with 2008.
Although the same figures recorded a fall in corporate insolvencies, it is thought that the total number of failed businesses actually increased as a result of the large number of small firms financed with personal credit.
As the availability of business finance has collapsed, many small business owners have turned to personal credit cards and overdrafts in an effort to keep their firms alive. Many have also turned to friends and family - non-bank finance accounts for £45 billion of the total cash raised by small businesses over the last two years.
According to business finance experts CreditPal, a "fear factor" is affecting many small business owners' finance choices. A large number are "scared of even applying for finance from banks and building societies," according to chief executive Chris Poll.
Accountants warned last week that the early period of recovery is historically the most dangerous for businesses, with both corporate and personal insolvencies jumping.
