Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk

Ever since the economic downturn, more people have turned to self-employment as a means of earning a living. Many traders in labour-intensive industries, such as farming, building forestry and fishing, are sole traders or self-employed.

While being your own boss gives workers a certain sense of flexibility and autonomy, there is an additional pressure to ensure the smooth running of your business in order to keep yourself financially stable.

Cash flow and credit

Debt charity StepChange has found that sole traders and the self-employed are typically more dependent upon credit and tend to have higher debts than those in contracted permanent employment.

You might find that this is the case in the first few years of working a sole trader, as your business takes time to establish itself and you purchase all the equipment you need for running the business.

However, a common scenario for sole traders is running out of money – especially if you’re waiting months at a time to be paid for work you have completed.

For many sole traders in labour-intensive industries, there is reliance upon having the right tools and/or equipment in order to complete the job at hand and receive payment. Should these tools break, this might mean that the trader is unable to continue with the job and, ultimately, not receive the payment needed. Without the necessary cash to purchase a replacement, it may not be possible to complete the job which, understandably, can put traders in a very difficult position.


Insurance Cover

Sole traders and those who are self-employed will need to consider business insurance to ensure that they are covered should their tools break or a similar type of scenario occur.

In the majority of cases your personal household insurance may not be sufficient to cover you for the tools and equipment you use for your business – particularly if you are working in a labour-intensive industry such as farming or building.

You may require other types of insurance to cover you for your type of trade. These include:

Motor insurance – If you use vehicles, even your personal car, for business purposes, you must make sure that your insurance policy reflects that your vehicle is covered for business use.

Equipment insurance – This is crucial for those whose trade is heavily dependent upon any equipment that they would not be able to work without. Some policies may also cover machinery as well as IT equipment used for business purposes.

Goods in transit insurance – If you work in a trade that requires goods or stock to be transported around the country, this type of cover will protect against loss or damage while the goods are in transit.

You can find out more about the different types of insurance used by sole traders and those who are self-employed in this article from the Money Advice Service.

Making an insurance claim can be a lengthy process, which can delay work if you’re waiting to replace or repair the damaged tools or equipment you need in order complete the job. When you make a claim, it will be assessed by your insurance company, and may take several weeks for the amount to be reimbursed – problematic if you are financially unable to fund a replacement before the claim goes through.

Depending on the type of cover you take out for your equipment, you may only receive the cost of the current value of the damaged item, or a contribution towards replacing it. Additionally, there may be some tools or equipment that you are unable to make a claim for, depending on what is agreed in your insurance policy.

In any of these circumstances, you might find yourself without the cash to purchase a replacement quickly enough to allow you to continue with your work.


How a Satsuma Loan works

If you need new tools quickly, you may consider applying for a Satsuma Loan to cover the initial outlay of purchasing a replacement.

You could apply to borrow between £100 and £1,000. If your application is approved, you can repay the loan in manageable monthly or weekly instalments over a period of 3 to 12 months.

We don’t charge extra fees. You only need to pay back the loan amount you borrowed along with the interest; the amount you agree to repay upfront will never change. This way, you can make the purchases you need in order to get on with the task at hand, and pay back what you owe in manageable installments.

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Representative example: £480 loan repayable over 9 months. 9 monthly repayments of £106.56. Rate of interest 133.1% p.a. fixed. Representative 535% APR. Total amount payable is £959.04