Third of small business owners turning to credit to cover household bills

31st May 2023

New research by the Business Debtline has revealed the impact of the cost of living crisis on struggling small business owners, with a majority of callers to the free debt advice survey going without essentials and worrying about meeting their commitments – and a third turning to credit to help cover essential household bills. 

The research found that almost all Business Debtline callers surveyed (96 percent) have experienced additional financial pressure due to rising costs.

Nearly six in 10 callers (57 percent) have gone without essentials like food, toiletries and clothing as a result – with 79 percent worried about meeting essential costs in the future. A third of callers surveyed (32 percent) reported turning to credit in the last 12 months to cover essential costs like energy
or council tax.   

Many callers to Business Debtline are dealing with competing personal and business costs and the impact of the high cost of living is making it far harder
to balance the two. The average amount of business debt owed amongst callers has risen by 43% since 2019 to £37,434.   

Almost a third of callers surveyed have fallen into arrears for one or more household bill in the previous 12 months. The three most common bills that callers
said they had fallen behind on last year were energy (19 percent, up from 12 percent in 2021), council tax (15 percent, up from eight percent in 2021) and food and groceries (12 percent, up from 7 percent in 2021).
More than half (56 percent) of Business Debtline clients have a ‘deficit budget’, where their income is too low to cover their essential living costs. At the same time, many are still recovering from the impacts of Covid, as the pandemic continues to be one of the most common reasons cited for financial difficulty amongst callers (14 percent). Lack of trade, higher trading costs and debt accrued as a result of the pandemic have, in many cases, all created barriers to recovery.   

More than half of callers surveyed (56 percent) are worried about being able to afford their energy bills in the future, with 40 percent worried about affording

Joanna Elson CBE, Chief Executive at the Money Advice Trust, the charity that runs National Debtline and Business Debtline, sai “The high cost of living has dealt yet another blow to the finances of small business owners. And with the impacts felt in both household and business finances,
the challenges are even more acute, and for many seem set to continue.”

“Of the people we help at Business Debtline, many are still dealing with the financial fall out of Covid-19.  The current crisis has compounded these financial
pressures further – and so it has never been more important to make sure small business owners access the free advice they need.”

“If you are a small business owner and worried about your finances, help is available.  Our advisers at Business Debtline provide free, independent advice
and will go through your options.  It is never too early or late to seek advice, so I would urge anyone who is struggling to get in touch.”