According to new research from Prospa, 40% of Kiwi small businesses use personal savings to support operations.
The company says this could lead to difficulty accessing business finance as the lending criteria tightens.
Almost two in five (38%) business owners said they would dip into their personal savings to support their business operations. The most common trend was seen among businesses less than two years old, with 64% of businesses stating that personal savings are their primary source of funding.
The report also revealed an economic strain, with 44% of those surveyed indicating they needed additional finance to achieve their business goals.
Restrictions from access to funds could cause increased frustrations for small business owners, and 66% of respondents indicated a need for additional funds to help solve various encountered problems.
Prospa managing director Adrienne Begbie says these types of behaviours can be problematic in the long run, as they can lead to financial and credit issues later down the track.
"Small business owners need to be mindful when blurring the line between their personal and business affairs, as it can lead to issues later when funds are required to achieve personal or business goals."
Begbie says that with authorities tightening thresholds on loans and credit standing, businesses need to be aware of their finances more than ever.
"The current Credit Contract and Consumer Finance (CCCFA) regulations has resulted in a highly critical eye, analysing every personal expense for Kiwis seeking loans," Begbie says.
"This can have an unintended but direct impact on small businesses ability to access funds, as financial institutions observe funds extracted for the business or vice versa due to the mixing of personal and business finance."
Begbie also says that being smart with how funds are managed makes a big difference, and it is crucial to find the right balance.
"We get that cash flow is the lifeblood of any small business, and access to finance is really critical in today's climate. With supply chain issues and labour shortages impacting every sector, many companies are requiring funds to order additional stock or are wanting to capitalise on unexpected or immediate opportunities so they can grow.
"With all the challenges our small business community has faced over the last two years, applying for finance should be easy, accessible and based on the merits of the business. As we enter the start of a new financial year and our borders start to reopen, I hope our small businesses are feeling bullish and are more confident in growing their ventures. We sure know they deserve it."