We are one of the UK’s foremost specialists in providing business debt advice and solutions for small businesses.
We specialise in helping directors of limited companies through challenging circumstances, always seeking to find the best possible solutions.
How do I Clear my Business Debt?
Dealing with debt problems will depend on the severity of the problems and every company has a different situation.
For some small businesses, debt problems have become severe, with an inability to pay suppliers or HMRC. We are experienced in negotiating time to pay arrangements. We can also advise whether you may have reached the point of insolvency in which case we can suggest the best options.
If you are still likely to be solvent, some business debt solutions may include:
- A careful, strategic inventory of your debts – sorting by interest rates and the amount due monthly. This process will give you a complete picture and allow you to prioritise which to pay first.
- Increasing sales – Increase cashflow via intelligent marketing, raising prices,incentivising existing customers to buy more.
- Reducing Costs – Do You Need to make some redundancies? Can you sell off equipment or downsize your office space?
- Debt Refinancing – Many business owners find themselves crippled by debt repayments which could be substantially lowered via strategic refinancing. Debt consolidation is a common strategy reducing the number of creditors in favour of a single monthly repayment.
- Improved Payment Terms or Invoice Financing – Requesting shorter payment terms or using an invoice factoring facility are both ways to improve the working capital cycle and improve your debt ratio.
Of course insolvency is the option where these fail and it’s a debt solution in the sense it will clear your debts and close the company.
Business Debt Advice
Our longstanding experience and team of specialists can free advice on the following options
- Apply for Finance – If it’s an option for you, finance may be the best way to pay creditors off and pay back what you owe over a measured period.
- Ask HMRC for a Time to Pay Agreement – If the debt is to HMRC, they may be open to a time to pay agreement, which is a monthly payment installment plan.
- Company Voluntary Arrangement – A CVA is a formal agreement to repay business creditors which is negotiated by an insolvency practitioner. Creditors must vote to accept the proposed terms.
- Consider a business rescue or restructuring process such as administration. Going into administration offers a moratorium against creditor action which an administrator temporarily takes over the running of the company
- Consider Voluntary Liquidation – At a certain point, debts may become intolerable and force you into liquidation. Choose this voluntarily before an angry creditor forces it with a Winding up Petition is the better course of action, retaining more control for company directors.
Could You Be Personally Liable for Business Debts?
While the limited company structure is designed to prevent personal liability, there are some exceptions where a director may be considered personally liable.
Some examples of this are as follows:
- Where a director has signed a personal guarantee document against business finances
- If a director has engaged in wrongful trading, i.e. knowingly continued trading after the point of insolvency.
- if you’ve tried to sell company assets at a falsely low price.
- if you have an overdrawn directors loan.
- If you’re engaged in fraudulent or criminal activity
Which Business Debts Should a Limited Company Pay First?
Of course paying everyone is important, but it’s possible to classify some business debts as more urgent than others based on their likelihood to threaten you with a statutory demand.
- National Insurance
- Corporation Tax
- Business rent
- Business rates
- Debts to Your Suppliers
- Bills to Accountant
- Credit Cards
- Payday loans
- Non essential business suppliers
Advice on HMRC Business Debt
The fact that HMRC are the single largest issuer of winding up petitions, the ultimate threat any limited company can face, tells you they mean business when it comes to collecting what is owed them.
One other factor reinforces this, further seperating HMRC from other creditors. This is the fact that winding up a company which owes them money is not always done on the basis of recouping money. HMRC will sometimes wind up companies purely on the basis of making an example, even if it costs them money.
If you owe HMRC money, simply reach out to one of our experts to find our what are your options at this point.