A growing number of small business owners and self-employed people are facing high levels of debt as they struggle to keep their businesses afloat, according to a new report.
Business Debtline is a free advice service aimed at people that run their own businesses run by the charity Money Advice Trust; it helped more than 36,000 people in 2017 and demand for its service is increasing. It says half of its callers have debts of £10,000 or more and nearly a quarter (23%) owe more than £30,000.
Its new report, Taking care of business, suggests there are a number of key challenges facing the UK's self-employed workers (who now represent 15% of the workforce). These include: late payments, low and variable incomes and a lack of essential business management skills.
The findings show that both business and personal debts are increasingly common for business owners, with the two often intermixed. Many callers to the helpline are from households that are younger, with lower household incomes, high uses of credit and limited resilience in terms of savings and pensions.
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Callers have a wide income range but 39% have gross business annual turnover below £25,000. Nearly half (45%) of callers surveyed said they experienced problems with late payments. Another issue is additional vulnerability caused by depression, anxiety and stress.
The Money Advice Trust has made three key recommendations for government, regulators and creditors. These include:
- The government's new Single Financial Guidance Body must ensure that self-employed people are well served across its debt advice, money guidance and pension guidance functions;
- The Small Business Commissioner should be given more powers, including the power to fine persistent late-payers;
- Creditors must extend their work on supporting individuals in vulnerable circumstances to include small business customers.
Joanna Elson, chief executive of the Money Advice Trust, said: "Self-employment and small business ownership continues to grow and play a crucial role in driving forward our economy. While many of these businesses are able to flourish, a growing number are struggling with high levels of debt, putting both their business and personal finances at risk."
Many self-employed people need advice at an earlier stage of their journey, she added. "There is support out there but the government needs to do more to proactively champion these opportunities to ensure that these businesses receive the help they need to succeed. For those already in difficulty there is some good news with the inclusion of sole traders in the government's planned Breathing Space scheme. However, too many people with business debts are suffering in silence for too long before seeking advice."