Sole traders struggle to access finance, study reveals

Wiseman Admin2019, CommercialLeave a Comment

Sole traders struggle to access finance compared to their limited company counterparts, a major new study has revealed.

The finding forms part of the Federation of Small Businesses’ (FSB) quarterly Small Business Index (SBI).

According to the report, just seven per cent of self-employed respondents applied for credit in the third quarter of 2019, compared to 13 per cent across the general business population.

Worryingly, just six in 10 (59 per cent) applications for finance were approved among sole traders, compared to seven in 10 (70 per cent) across the general business population.

Worse yet, almost two thirds (65 per cent) of successful self-employed finance applications were offered an unaffordable borrowing rate of six per cent or more. Comparatively, under half (49 per cent) of the entire business community combined were offered a six per cent or more borrowing rate.

Commenting on the figures, the FSB said sole traders are continuing to “struggle disproportionately” when it comes to accessing external finance, and this is having a significant impact on growth and profitability.

The SBI reveals that growth among self-employed workers has fallen into negative territory in the three months to September. Around 40 per cent of sole traders say revenue has fallen in Q3, compared to just 35 per cent who reported rising revenue.

The study comes before the introduction of off-payroll working rules for the private sector, which are expected to have a huge impact on the success of self-employed workers.

“Against such an uncertain backdrop, the self-employed certainly don’t need an IR35 rule change that makes hiring contractors less attractive. We’ve already heard noises from big corporates to indicate that – if this change does take effect in April as planned – they’ll pull the plug on sole traders,” said FSB National Chairman Mike Cherry.

“Common sense dictates that a delay to the April roll-out of these rules is now needed.”

For help and advice accessing finance, please get in touch with our expert team.

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