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• 09 Jan

  Alternatives To Funding Your Business With Your Own Personal Funds

  When you run your own business you often end up putting in your own money, using your personal funds to keep the business going. It's the easiest of the sources of business funding, as you don't have to apply (if you already have the money) and business owners often have a "self-sufficient" attitude that they don't want to turn to external sources of finance.

  The Dangers Of Using Personal Funds To Finance Your Business

  The dangers of using your personal money are that:

  • You risk losing your personal funds if the business can't repay you.
    
    
  • If the ownership of the business is shared, unless you all put in personal money proportionately, the situation is not fair and equitable between partners.
    
    
  • You may be borrowing elsewhere personally to enable that funding, and that will result in charges. If you have anything on credit cards, loans, finance or mortgages you are injecting money that could be used to pay that personal borrowing down - even your mortgage, reducing personal finance charges - which can be expensive.
    
    
  • Again if you are borrowing in any way, those personal finance costs may not be able to be offset against your business taxes, whereas business finance costs may be able to be offset against taxation.

  With some funding sources, it is understandable that you might not want to go down that route. For example, any form of equity finance will require that you give up some ownership, and control, of your business, in exchange for funding. However debt finance does not work like that, you borrow funds and pay it back with a margin for using the service e.g. a business loan - and that margin may be able to be offset against tax.

  Many Inject Their Own Money

  Many UK SMEs use personal funds to fund their businesses, injecting their own money. In some cases, this may be the only option they feel they have available or it may be that they think they will save on business borrowing costs. However, there are plenty of alternatives to using your own personal money to fund your company and it can even make financial sense.

  Business Finance To Withdraw Your Personal Funds

  Call Sean on 03330 113622 to discuss the business finance alternatives that could prevent you from needing to inject your own funds, or that could allow you to now withdraw your personal funds from your business.

  By Glenn Blackman