How Debt Can Stop Your Small Business From Growing And Achieving Its Best
26th January 2017
For many small businesses, in order to begin the exciting new venture means they start in debt. Most small businesses are reliant on an element of debt financing such as a business loan or short-term loan in order to finance the necessary expenses of offices, employees and the product or service offering.
It can be hard for small businesses to carefully balance the distribution of financing, too much equity financing and you can lose the decision power, too much debt can put the company in jeopardy, and a downturn in the economic situation such as a recession can severely hinder businesses in their ability fulfil their debt obligations.
Debt can come in many forms and can seriously impact the growth and development of small businesses, here we look at the reasons why small businesses are suffering from debt problems and how it can stop high achievement and business growth.
76% Of Small Businesses Have Written Off Unpaid Debt
One of the biggest issues that small businesses face is the problem of delayed payments and unpaid bills, in the UK alone the amount that is being written off is £134 million every single day. In fact, the average amount written off by a UK SME is £11,708 per year. The non-payment to these businesses can cause significant challenges such as paying wages, suppliers, meeting debt repayments and purchasing inventory.
When it is difficult to meet debt repayment, there is no chance of growth as, without finance, you cannot invest in your staff, product and service offering or marketing to a new audience. This lack of finance can turn into a downwards spiral as there is less support from banks and lenders to provide money coupled with the risk of non-payment from your clients.
Financial Crises Leave Lending Interest Rates High
The Bank Of England has seen that the interest rates on lending to small businesses have remained particularly high, whereas medium-sized businesses have fared much better. Small businesses have also complained of the availability of credit being a significant issue, where they are struggling to persuade banks to lend them money.
While some businesses are accustomed to the market conditions, the banks favouring medium-sized enterprises has left small businesses unable to compete against their market competitors. The lack of support from the bank not only means a reduction in finances but also means they’re unable to win business against their medium-sized rivals who have a better financial situation that helps them to generate business.
Business Debt Leads To Mental Health Issues In Business Owners
In a recent survey by Creditfix, we discovered an alarming correlation between personal debt situations and mental health. For small business owners who invest all they have into their businesses and are left in debt it can cause significant mental health issues which leads to owners not being able to cope with running the business or being able to grow the business effectively.
In the survey by Creditfix, 74% of respondents cited that their debt situation had directly led to poor mental health, with people having high levels of anxiety and stress, insomnia and other sleep-related problems as well as depression and panic attacks.
While most of the respondents continued to work, the issue of debt and mental health issues weighing heavily on their shoulders means, it can be impossible to see the light at the end of the tunnel. This can lead to poor business decisions, and a lack of foresight to work out how to grow the business with a burden of debt which seems impossible to shift.
The results of the recent survey are of grave concern, and Creditfix wants to help those business owners who are suffering from debt as well as the effects of mental health issues. Creditfix helps people to tackle their debt problem by offering support and advice to help business owners plan for and enjoy a debt-free future.
Not Just Financial Assistance
Creditfix is gravely aware of the impact that debt can have on a person’s mental health which is why their staff have all been specially trained to deal with vulnerable customers. Creditfix understands that debt doesn’t just affect one person, it impacts on the business, colleagues, friends and family, which is why their support and assistance helps customers on a personal level as well as stopping a debt that is spiralling out of control.
If you and your small business are struggling with debt problems, you can find help and support by visiting www.creditfix.co.uk/seiva , so that you can find the path to a clearer financial future.