Copy article

"The rise in business overdraft applications could be a significant red flag"

ended 25. September 2025

The number of sole traders, solopreneurs and micro business owners applying for overdrafts has shot up, new data has shown. Experts said it “could be a significant red flag” and that “it is a recipe for disaster with more tax rises forecast in the upcoming Budget”.

But solopreneurs aren't just turning to banks for cash flow. One pawnbroker said “we’re seeing a marked increase in sole traders and solopreneurs using luxury jewellery, watches and gold to unlock short-term cashflow”.

Among businesses with no employees, such as sole traders, freelancers and micro businesses, there was a significant increase in applications for a bank overdraft facility in 2024 compared to 2023 (45% in 2024 and 30% in 2023), according to official survey data published this morning. 

The Department for Business & Trade survey also found that around 12% of businesses with no employees sought external finance in 2024, an increase on 2023 (8%) and 2022 (7%). This was the highest level since the survey began in 2015.

Also in 2024, the survey found that 27% of businesses with no employees reported growth in annual sales (turnover) over the preceding 12 months, a decrease compared with 2023 (32%) and 2022 (35%). A higher proportion of businesses with no employees (32%) reported a fall in turnover during this period (31% in 2023).

Colin Crooks MBE HonDsc, CEO at London-based business consultancy, Intentionality, said “the rise in business overdraft applications could be a significant red flag”.

He added: "Yes, an overdraft is often the most sensible solution for solopreneurs facing fluctuating incomes. After all, you only pay as you use the overdraft, whereas a loan is a constant cost.

“However, it's clear from my work with solopreneurs, and this data on increased applications, that incomes are static while costs are rising. Solopreneurs are natural optimists who hope for an upturn, but in the short term, they need cash flow solutions. The real answer isn't more debt, it's getting more customers.”

Rob Mansfield, Independent Financial Advisor at Rootes Wealth Management, was also concerned by the data: "If this financing is being sought for survival reasons, then it's a seriously concerning trend.

"With just 1 in 4 businesses reporting turnover growth, it suggests tough times. But it could also be that the banks are marketing financing more. I've been approached by my bank about applying for an overdraft three times in the past six months."

Jim Tannahill, Managing Director at London-based Suttons and Robertsons, a pawnbroker, commented: "We’re seeing a marked increase in sole traders and solopreneurs using luxury jewellery, watches and gold to unlock short-term cashflow.

"Rising costs, late payments and tighter margins are very real challenges for this group, and they often don’t have the same easy access to credit as larger firms. But this isn’t about failure, it’s about flexibility.

"For many, coming to us is quicker and less onerous than going through the bank, and it allows them to turn luxury into liquidity exactly when they need it.

Keith Budden, Managing Director at Ensurety, was not surprised by the data: "For anyone with their ear to the ground, I don't think any of these figures will come as a surprise. I've been running different businesses for 28 years now, so have been through a few tough times, but I've never seen so many small one person businesses either shutting up shop or considering doing so than I am right now.

“Life for any small business is really tough right now, as larger businesses (who tend to be the ones that small 1 or 2 person companies rely on) are cutting budgets, and even those who are spending even relatively small sums of money are taking much longer to make a decision.”

Michelle Lawson, Director at Lawson Financial, said the upcoming Budget could make things worse: "The pressure is real. I have just had my accounts through for the YE25 and the rise of costs in keeping a business running is out of control.

"The Government say they welcome business and entrepreneurship but the figures show different. These businesses are successful but are being strangled by red tape, soaring tax and increasing costs simply to stand still.

"It is a recipe for disaster with more tax rises forecast in the upcoming Budget. Welcome to bleak Britain."

Scott Gallacher, Director at Rowley Turton, added: “I suspect this is a two-fold cost of living problem. Firstly, small businesses are seeing their customers cut back due to the squeeze on household budgets.

"Secondly, those same business owners are facing rising personal costs and therefore need to take higher drawings from their businesses. Put together, those two factors are a car crash economically.

"My concern is that some are using business finance as a short-term sticking plaster to fudge the situation—and I fear it will end badly for them.”

Eamonn Prendergast, Chartered Financial Adviser at Palantir Financial Planning Ltd, said the current business climate is toxic: “Sole traders turning to overdrafts is a clear warning sign. The sharp rise in overdraft applications by one-person businesses highlights the mounting financial pressure on sole traders and freelancers.

"Overdrafts are usually the most expensive form of borrowing, so when nearly half of applicants in 2024 turn to them, it suggests day-to-day cashflow is under real strain.

"At the same time, sales growth is stalling, and more are reporting falling turnover, which is a toxic mix. For the wider economy, this matters because sole traders make up a huge part of the UK’s entrepreneurial backbone.

"If they’re leaning on overdrafts just to keep the lights on, it points to fragility that could spill into higher insolvency rates already running at elevated levels according to official insolvency data.

"The danger is that today’s short-term borrowing plugs quickly become tomorrow’s liquidations unless conditions improve or more tailored support is offered.”

7 responses from the Newspage community

Copy all

Star Quote
Copy

Colin Crooks MBE HonDsc
CEO at Intentionality
The rise in business overdraft applications could be a significant red flag. Yes, an overdraft is often the most sensible solution for solopreneurs facing fluctuating incomes. After all, you only pay as you use the overdraft, whereas a loan is a constant cost. However, it's clear from my work with solopreneurs, and this data on increased applications, that incomes are static while costs are rising. Solopreneurs are natural optimists who hope for an upturn, but in the short term, they need cash flow solutions. The real answer isn't more debt, it's getting more customers. Businesses should review their marketing strategies rather than rely on borrowing to bridge the gap.
Star Quote
Copy

Jim Tannahill
Managing Director at Suttons and Robertsons
We’re seeing a marked increase in sole traders and solopreneurs using luxury jewellery, watches and gold to unlock short-term cashflow. Rising costs, late payments and tighter margins are very real challenges for this group, and they often don’t have the same easy access to credit as larger firms. But this isn’t about failure - it’s about flexibility. For many, coming to us is quicker and less onerous than going through the bank, and it allows them to turn luxury into liquidity exactly when they need it. What’s striking is their resilience and creativity: rather than slow down, they’re finding ways to keep projects moving, staff paid and customers happy. In that sense, it’s not just a sign of pressure but also of resourcefulness. Small businesses are backing themselves and staying nimble, even in a tricky economy.
Star Quote
Copy

Keith Budden
Managing Director at Ensurety
For anyone with their ear to the ground, I don't think any of these figures will come as a surprise. I've been running different businesses for 28 years now, so have been through a few tough times, but I've never seen so many small one person businesses either shutting up shop or considering doing so than I am right now. Life for any small business is really tough right now, larger businesses (who tend to be the ones that small 1 or 2 person companies rely on) are cutting budgets, and even those who are spending even relatively small sums of money are taking much longer to make a decision. I have one potential client I'm bidding for with a relatively small project (approx £4k) are they are taking it to their board for approval. In the past, that would just have been, 'OK we want you to do the work, here's the purchase order, crack on'. Those days are gone for now, but hopefully not forever.
Copy

Editor
Scott Gallacher
Director at Rowley Turton
I suspect this is a two-fold cost of living problem. Firstly, small businesses are seeing their customers cut back due to the squeeze on household budgets. Secondly, those same business owners are facing rising personal costs and therefore need to take higher drawings from their businesses. Put together, those two factors are a car crash economically. My concern is that some are using business finance as a short-term sticking plaster to fudge the situation—and I fear it will end badly for them.
Copy

Editor
Michelle Lawson
Director at Lawson Financial
The pressure is real. I have just had my accounts through for the YE25 and the rise of costs in keeping a business running is out of control. The Government say they welcome business and entrepreneurship but the figures show different. These businesses are successful but are being strangled by red tape, soaring tax and increasing costs simply to stand still. It is a recipe for disaster with more tax rises forecast in the upcoming Budget. Welcome to bleak Britain.
Copy

Editor
Eamonn Prendergast
Chartered Financial Adviser at Palantir Financial Planning Ltd
Sole traders turning to overdrafts is a clear warning sign. The sharp rise in overdraft applications by one-person businesses highlights the mounting financial pressure on sole traders and freelancers. Overdrafts are usually the most expensive form of borrowing, so when nearly half of applicants in 2024 turn to them, it suggests day-to-day cashflow is under real strain. At the same time, sales growth is stalling, and more are reporting falling turnover, which is a toxic mix. For the wider economy, this matters because sole traders make up a huge part of the UK’s entrepreneurial backbone. If they’re leaning on overdrafts just to keep the lights on, it points to fragility that could spill into higher insolvency rates already running at elevated levels according to official insolvency data. The danger is that today’s short-term borrowing plugs quickly become tomorrow’s liquidations unless conditions improve or more tailored support is offered.
Copy

Editor
Rob Mansfield
Independent Financial Advisor at Rootes Wealth Management
If this financing is being sought for survival reasons, then it's a seriously concerning trend. With just 1 in 4 businesses reporting turnover growth, it suggests tough times. But it could also be that the banks are marketing financing more. I've been approached by my bank about applying for an overdraft three times in the past six months.