New research has revealed that owners of small businesses are being forced to use their credit cards, saving accounts and to borrow money from friends or family in order to keep their businesses afloat.
The findings have called into question the pledge made by the government to provide small businesses with necessary funds to keep them open during the recession.
Late payments from the government are becoming problematic as the Federation of Small Businesses' (FSB) study of 10,000 firms showed that one in three businesses had not received their government payments on time.
The research also revealed that small businesses were being affected by customers having problems with their payments and not paying their bills on time.
Nearly a tenth of those who were surveyed said that they relied on a company or personal credit card or a personal bank loan. This is a new trend as almost half of those who were relying on personal credit had not done so in the past year, up until October.
A third of the businesses also said that they had been affected by changing interest rates with the majority of the changes putting the interest charges up; only one in six businesses surveyed said that the interest rates had decreased.
The FSB chairman John Wright said: "It is shocking that after the Government put the prompt payment code in place so many businesses are still being paid late.”
"Small businesses rely on receiving payments within the timescale agreed to maintain cash-flow to ensure the business can run on a day-to-day basis.”
The government had pledged to make all payments to small businesses within 10 days, but this has clearly become a problem in the private sector.
The Department for Business said that findings were 'totally at odds' with its own data which is collected each month from supplier invoices.
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