Dealing with Business Debt

About Business Debt

Every company, no matter how successful has debts.  Business debts become an issue when they grow out of control and your company’s cash flow is now longer sufficient to maintain payments.  This may be a temporary problem or may be a sign of bigger issues.

Whatever the cause, it is important to deal with business debt problems as soon as possible.

When business debt gets out of control, your company will be more likely to suffer from short term cash flow difficulties.  This in turn can impact your ability to pay suppliers in time to keep key materials and services flowing.  In more severe cases this can even lead to problems meeting your payroll, insurance or rent commitments.

Instead of burying your head in sand and allowing the stress to build why not call our free business debt line to discuss the options available to you and your business.

Methods Creditors Use to Collect Debts

If you do not take positive action your creditors are likely to take action to recover the amount you owe them.  There are a number of methods available to creditors which include:

• General pressure and cut off of supplies – Initially your creditors may just increase the daily pressure on you to pay through increasingly hostile telephone calls or even ceasing supplies.
• County Court Judgements and Statutory Demands – If just chasing the debt doesn’t work, a creditor can issue a CCJ or Statutory Demand.  Either of these will have a negative effect on your company’s credit rating and is likely to lead to further recovery action if unpaid.
• Bailiffs – If a creditor obtains a CCJ of Statutory demand and you do not pay, they can instruct Bailiffs to attend your premises.  This will result in the removal of company assets potentially leaving you unable to trade.
• Winding Up Petition – Ultimately, if you do not pay a business debt then a creditor can issue a winding up petition against your company.  This will result in your bank account being frozen and your business being closed down.

Available Courses of Action to deal with Business Debt

1. Raise Additional Finance

If your Company has physical assets or book debts that are not already subject to finance agreements then it may be appropriate to seek to raise additional finance against them. This may take the form of a loan, overdraft, asset finance or a factoring facility depending on the amount of finance required, the period the funding is required for and the nature of the assets and security available.

Before you seek to raise any additional finance it is important to ensure that your underlying business is profitable and that it is able to meet any new financial commitments. We can help you to understand the different finance options that may be available and can put you in touch with appropriate finance providers based on your individual business circumstances.

2. Put the Company into Creditors’ Voluntary Liquidation (CVL)

If you want to try to save all or part of your business then it is often appropriate to place the Company into Creditors’ Voluntary Liquidation. This is a Liquidation which is instigated by you as a director using an Insolvency Practitioner of your choice. CVL is also the most appropriate way to close your Company if it has assets left even if you don’t want to continue in business.

In a CVL, the job of the Liquidator is to sell the Company’s assets for as much as possible. Usually, the assets are of most value to you in a successor business (known as a Phoenix company). You are therefore able to buy them back free from the Company’s historic debts. For the purposes of the CVL, the assets are valued at their current market value as a whole so are often much cheaper than they originally were.

If the Company does not have any assets but you still want to place it into Creditors’ Voluntary Liquidation then it will fall to the Directors to pay for the Liquidation.  If you are in this situation then we will always agree a fixed fee with you in advance and if possible will agree staged payments with you.  You may also find that you are entitled to compensation for redundancy and loss of notice which may offset some or all of the cost.

You can find out more about Creditors’ Voluntary Liquidation here.

3. Put the Company into Administration

If your Company needs immediate protection from creditor recovery action then it may be appropriate to place it into Administration.  Unlike other Insolvency processes, Administration provides legal protection almost from the moment the process is started and so in the right circumstances can be a very useful tool.

Unless you have already received a Winding Up Petition, this process can be completed without the need for an application to Court and can therefore be put in place extremely quickly.  We are able to deal with all parts of this process for you but because of the complexity, the sooner you contact us, the more quickly and easily we will be able to help.

You can find out more about Administration here.

4. Propose a Company Voluntary Arrangement (CVA)

If your business has debts due to a large number of creditors or if the amounts owed are considerable then you could consider proposing a Company Voluntary Arrangement or CVA.  A CVA is a formal insolvency process where your business pays a monthly payment based on what its cash flow forecasts say it can afford over a period of up to 5 years.

As CVA payments are based on cash flow forecasts rather than on the debt owed, most CVAs result in the business paying less than 50% of the total debt back.  The balance of any debt is then written off after 5 years.  As a CVA allows the business to continue in its current legal form, CVAs also have the benefit of allowing ongoing contracts and accreditations to remain in place.

Our Service

When you call our business debt line, you will speak directly to a licensed Insolvency Practitioner from the outset. We will take the time to understand your Company’s debt problems, what your future intentions are for the business and ultimately what outcome you are hoping for.

Whichever route you choose, we will help you put appropriate plans in place to deal with your business debt and will guide you throughout the process.