Small businesses hoard cash instead of ploughing it back into their business due to fears their overdrafts may be slashed, a Bank of England study has found.
They also stay away from applying for loans in case their current borrowing provision is reviewed and taken away from them, leaving them in a worse position.
With more than a third of small businesses having their applications rejected, small businesses are relying on credit cards, personal loans and savings in order to maintain their companies.
Despite this the turnover for small businesses has increased by 16.2 per cent since 2009 showing that they are worth the gamble and could be the key to improving the economic situation in this country.
Paul Aitken, CEO of Borro, said: “Requests for short-term loans to small business owners secured against high value personal assets have risen 85 per cent in the first half of 2011 compared to 2010.”