Small business owners losing sleep over Covid impact
A report by the charity titled Building back business: tackling small business debt in the wake of Covid-19 found that many self-employed people and small businesses are continuing to struggle with the financial impact of Covid.
Based on findings from a survey of callers to the charity’s free Business Debtline service, the report shows that while many self-employed people and small business owners are feeling a slow return to normality, others are facing an increasing burden of debt.
A significant proportion of callers to the service continue to struggle to meet day-to-day personal and business costs, including repaying government-backed loans, and fear for the future of their business.
Six in 10 (62%) of those surveyed said they had fallen behind on one or more business-related bill as a direct result of Covid, while three out of four (75%) were behind on one or more credit commitment. More than half (55%) reported falling behind on at least one household bill, with energy bills (25%) the most common.
Half (48%) of small business owners surveyed that had taken out a government-backed Bounce Back Loan said they could not afford to repay it.
For most small business owners surveyed (78%) the future of their businesses remained a concern. Two in five (38%) were not sure how long they could continue to trade for, with worries about repaying debts, keeping up with bills, and whether trade would recover to pre-pandemic levels.
With self-employed people estimated to have contributed £316bn to the UK economy last year alone, the Money Advice Trust is calling for further action from government, regulators and creditors to support their recovery.
The charity says the government should work with the British Business Bank and lenders to ensure a ‘fair and affordable’ approach to recovering Bounce Back Loans. It says that creditors should offer specific forbearance to self-employed people struggling to repay Covid-related debts.
It also called for the Department for Work and Pensions (DWP) to review the support available to self-employed people on the lowest incomes, including reviewing the Minimum Income Floor in Universal Credit.
Joanna Elson CBE, chief executive of the Money Advice Trust, said: “Covid-19 has had a profound impact on the finances of self-employed people, and it’s clear for many small businesses, the crisis is far from over. Challenges to meet day-to-day business and personal costs, a continued reduction in trade, and worryingly, a growing burden of debt are common. With rising energy, fuel and food prices added to the mix, this will be a tough winter with more self-employed people at risk of falling into debt.
“For many of the small businesses we spoke to, emergency government support, which provided some welcome financial relief at the time, is now an added pressure as repayments are due. Government and creditors must continue to support those small businesses facing a sustained impact. This needs to include a fair and affordable approach to recovering Bounce Back Loans and a review of support available for self-employed people on the lowest incomes. Following the financial shocks so many have faced in the last year and a half, this ongoing support will be crucial in giving these small businesses the best chance to recover.”