Company Debt Help
Does your company have debt problems? Many companies face debt issues at one point or another, ranging from company overdrafts that are nearing their limits to statutory payment demands from unpaid and frustrated creditors.
If your company needs debt advice, it’s important not to panic. A wide selection of options are available for helping your company repay its creditors and return back to normal trading, ranging from emergency financing to voluntary arrangements.
When your company faces serious debt problems, it’s important to solve both the results of the problem – in this case, creditor pressure – and the series of choices your company made that caused the debt problem to emerge in the first place.
Does your company face a potential debt crisis?
If your company is doing well and generating a significant profit every quarter, it’s often difficult to imagine that it could one day find itself facing debt issues. A lot of companies face debt problems that creep up on them gradually over time. These are often caused by poor financial management or a lack of long-term finance planning.
Even if your company seems to be doing well right now, it could be at risk of serious debt issues if it displays some of the following indicators:
- Your company has tight cash flow that frequently makes paying suppliers, employees and other creditors difficult.
- Your company purchases its stock from multiple suppliers to “spread its credit around” and avoid amassing a single large debt.
- Your company’s overdraft is frequently near or at its maximum and stays near its limit without being fully repaid.
- Your company is or previously has experienced problems paying its taxes, including VAT and PAYE on time or has received a warning letter from HM Revenue and Customs in the past.
- Your company’s management is often unaware of its trading profit or loss, its average costs, its key accounts and other important company information.
All of these issues can seem minor when they occur one by one, but they can often lead to serious debt issues. When market conditions change or a client fails to pay your company, it could go from profitable to struggling extremely quickly.
What company debt help options do you have?
If your company is experiencing a debt crisis, it will likely begin to come under a great deal of pressure from its creditors. Failing to pay creditors on time has the potential to lead to your company being sent a statutory payment demand. This is a final demand for payment from your company’s creditors, requiring your company to pay within 21 days. At this point, you need to take decisive action on a debt relief solution to avoid your company being wound up.
Your options, as a company director, vary depending on whether your company is viable or not. If your company is viable and capable of continuing to trade once its creditors are paid, you can:
- Propose a company voluntary arrangement (CVA) to your creditors, which lets your company repay some or all of its debts via a single payment each month over a period typically between six and 60 months.
- Raise capital via invoice factoring or discounting, which lets your company improve its cash flow by borrowing against future invoice earnings or get a set percentage of its invoices paid into its accounts immediately.
- Use emergency financing to raise money for your company, which can be used to pay creditors and relieve the financial and legal pressure that your company is under.
- Enter into administration to protect your company against the threat of a winding up petition being filed and appoint an administration to pay your company’s creditors and facilitate a recovery.
If your company is no longer viable, you also have a number of options for ending creditor pressure and relieving its debt issues. Some of these options may result in the closure of your company. These include compulsory liquidation, in which your company will be shut down by its creditors and its assets liquidated, and creditors voluntary liquidation (CVL) – a process involving the voluntary liquidation of your company’s assets.