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A loan from family members could save many SMEs

A loan from family members could save many SMEs

While a business loan from family members may seem unorthodox, it is not without precedent: in fact, it is a route many took during the last financial crisis.

It’s been well documented that there was a veritable boom in start-up businesses in the wake of the Global Financial Crisis (GFC). The Kaufmann Foundation’s Index of Entrepreneurial Activity found that 60,000 new businesses began each month in 2009, compared to 40,000 a month in 2007.

 

It was one of the most unexpected trends to emerge from the GFC and the recession that followed it. In Australia, research has shown that the number of business start-ups increased by 6.8% per annum in the five years leading up to 2012, and then further increased faster than in most other developed nations. 

 

 

Crisis brings opportunity

Many businesses were started out of necessity; job losses and retirement savings being inadequate all contributed to the phenomenon. Without financial institutional support, many start-ups turned their attention to those closest to them – family and friends, to loan them enough money to start their businesses and do as best they could to recover from the most significant financial crisis global markets had seen since the Great Depression.

Tim K. Dean, Credi Founder | Commentator & Expert on Family Lending, Bank of Mum & Dad and Neo-Credit Scores is available for media interviews and appearances. More…

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