Credit Issues Force Small Business Owners to Finance with Personal Assets
COLUMBIA - Assistant professor in the MU financial planning department Tansel Yilmazer says that due to a current reduction in credit availability, some small and family-owned businesses are resorting to raising money from personal sources without resorting to bank loans. Yilmazer says that businesses that use owner resources and put off payments for household expenses make up the majority of businesses that report needing further financing for their businesses.
As a result of these businesses not establishing relationships with banks, they may face problems obtaining future bank loans, Yilmazer says. She notes a growing trend of households putting their own assets at risk for their businesses.
"Recession has increased the risk of business failure," Yilmazer said. "Since business is inherently risky, financing with owner resources would seem to extend that risk to the household in ways that owners may not be adequately considering."
Yilmazer's study was published i the Journal of Family and Economic Issues and was co-authored with Holly Schrank from Purdue University.