New businesses need just £17,095 in working capital for first year's trading

A new report exploring the financial trends among fledgling new British businesses found that firms founded within the last three years required just £17,095 in working capital in their first year of trading.
 
The study, published by O2 Business, discovered the reasons why small firms now need less working capital than they used to in order to establish themselves as a business.
 
Three-in-five small firms surveyed said they could launch for the same working capital or less if they had their time as a new business again
 
One of the main reasons businesses are able to keep working capital to a minimum is by reducing upfront costs by leasing goods.
 
Almost half of the small firms surveyed admitted to preferring to rent or lease goods because they believed it was the ‘smartest’ way to reduce their upfront costs.
 
The desire to keep up-to-date with fast-moving technology was also a contributing factor, with over a third of respondents suggesting that leasing or renting technical equipment was cost-effect and gave them strategic benefits.
 
Interestingly, 46 per cent of businesses viewed paying monthly as the future and anticipate that it will increase in the next five years.
 
Paul Lawton, general manager of SMB at O2, said: "Small businesses still struggle to grow due to a lack of funding, but the good news is that many looking to start up have a number of alternative options open to explore – such as leasing – which can work out far more cost-effective in the long run."
 
The most popular items to rent or lease, according to the 518 small businesses surveyed, included:

• Phone lines (62 per cent)

• Office space (40 per cent)

• Photocopiers and franking machines (28 per cent)

• Water-coolers (21 per cent)

• Cars and vans (18 per cent)

• Smartphones or tablets (13 per cent)

• Coffee makers and vending machines (13 per cent)

• IT equipment (11 per cent)

Last updated: 22nd March 2013