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Rising debt levels for the self-employed

Monday, 5th November 2018

New research from Business Debtline show that nearly a quarter of those that are self-employed owe £30,000 or more and nearly half of those contacting the service had debts of £10,000 or more. Many said their business were affected by irregular incomes, late payments and lack of competent  business skills.

Main reasons for business failure include;

Late payments

Uncertainty when money earned will be paid, this can lead to poor cash flow resulting in increased debt problems

Low and irregular income

While the people helped by Business Debtline had a wide income range, 39 percent had gross business annual turnover below £25,000. Low and irregular income were major challenges and often prevented small business owners from saving, investing in the business and having the financial resilience to deal with changes in circumstances such as ill health.

Lack of essential business management skills

Business failure was highlighted as one of the main reasons for contacting Business Debtline. Although external factors can affect a businesses success  many of those helped lacked some essential skills and knowledge needed to run a business. Before starting trading, most felt confident completing a budget (80%) but they were less confident constructing a business plan (59%) and completing tax and VAT returns (47%).

Using personal credit to pay for business costs

It is not uncommon for self-employed people to have both business and personal debts, such as credit cards, which can further complicate their situation. This was confirmed with the research revealing that more than six in 10 callers to the charity (61%) said they had used personal credit in the past two years at some point to pay for business costs and bills.

Breathing space

Last month the Government announced plans to increase the ‘breathing space’ period from six weeks to two months. During this time people with debt problems would be protected from creditors.

Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs Business Debtline, said:

“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.”

On a positive note

After seeking advice from Business Debtline, 82% of callers reported that they felt more in control of their finances, with 86% saying they were less likely to find themselves in a similar situation again.

About and how to contact Business Debtline

Business Debtline, the UK’s only dedicated free debt advice service offer free advice for people who are self-employed or small business owners. In 2017 they helped more 36,000 people with demand for the service increasing.

Telephone 0800 197 6026 Monday - Friday 9am-8pm






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