There is nothing newsworthy in saying that new businesses and small businesses often struggle. It is an extremely difficult economic time for many businesses and a lot of hard work and effort needs to be undertaken to ensure that businesses have a chance of survival. What is newsworthy is the fact that small business debt being written off is happening at an alarming rate.

This has come to light thanks to a study undertaken by Direct Line for Business. The report focused on small and medium sized businesses in the United Kingdom and it turns out that more than £5.8bn was written off last year. This equates to a sum of over £21,000 being written off every single day. This is a sum of money that has to grab the attention and in this light; the level of small business debt being written off is an alarming thing in the UK.

The report pointed out that 19% of the small businesses who took part in the study have written off debt. It is believed that the estimated average loss for firms comes in at £31,300. This would be bad news but with 9% of respondents saying that they have written off more than £100,000 there is a need to realise that new and small firms face major problems in dealing with their finances.

Major levels of small business debt being written off in the UK

The most commonly cited reason for these problems comes with suppliers becoming insolvent and no longer being in a position where they could pay what they owe. This was cited by 29% of respondents. The next reason was put down to the idea of suppliers lacking suitable funding to pay off their debt, which was claimed by 17% of respondents.

11% of respondents said that they didn’t have the time to pursue debt and a further 11% said that they didn’t have the funding to chase people or businesses that owed them money. 10% of respondents said that they didn’t want to damage a future relationship with a firm by pursuing debt and 3% of respondents said that they didn’t know how to go about reclaiming payments.

There are over half a million firms in the UK classed as being a small business and the level of small business debt being written off should be a concern to the country. If these firms are struggling to stay on top of their finances, it will have a knock-on effect to so many people and businesses.