Facing financial challenges and finding yourself unable to meet the payments for your limited company mortgage can be an overwhelming and stressful situation.
Whether due to unforeseen circumstances, a downturn in business, or cash flow constraints, the inability to afford your mortgage can pose significant risks to your company’s financial stability and future growth.
It’s crucial to address this issue proactively and seek viable solutions to navigate this difficult situation.
In this article, we will discuss the options and strategies available to business owners who find themselves unable to pay their limited company mortgage, providing insights and guidance to help you make informed decisions and mitigate potential risks
What to do if you are in commercial mortgage arrears
If you find yourself in commercial mortgage arrears, it’s essential to take immediate action and explore potential solutions to address the situation. The first step is to communicate openly with your mortgage lender. Reach out to them as soon as you become aware of the arrears and explain your financial difficulties in detail.
Lenders are often willing to work with borrowers to find mutually beneficial solutions. They may be open to restructuring the mortgage, extending the repayment period, or temporarily reducing the monthly payments to alleviate the financial strain. Additionally, you can seek professional advice from a financial advisor or a specialist in commercial mortgages.
They can provide valuable insights into your specific situation and suggest strategies to help you navigate through the arrears. It’s crucial to carefully assess your business’s financial position and cash flow to identify areas where you can make adjustments and potentially increase revenue or reduce expenses.
This may involve exploring opportunities for business growth, implementing cost-cutting measures, or renegotiating contracts with suppliers. Finally, consider seeking assistance from relevant government or non-profit organizations that provide support to businesses in financial distress.
These organisations can offer guidance, financial aid, or access to resources that can help you manage the arrears and regain stability. Remember, taking prompt action, seeking professional advice, and maintaining open communication are vital when dealing with commercial mortgage arrears
Contact your mortgage lender
It’s important to be upfront and honest with your mortgage lender about your financial situation. They may be more inclined to give temporary lower payments if they can see that you’re trying to make things right and aren’t purposefully dodging paying.
As you are aware, your mortgage is a priority payment, and by getting in touch with your lender right away, you demonstrate that you are serious about your company’s commitments. Essentially, you want to avoid having the property seized, and prompting this kind of action can be helpful.
Seek insolvency advice when you can’t pay your commercial mortgage
If you can’t make your limited company’s commercial mortgage payments, it’s critical to get licensed insolvency advice. However, just because the company has entered into insolvency doesn’t mean it has to shut down.
There are several ways you might be able to make things better, but the most important thing is to keep the lender from taking legal action. The mortgage provider may quickly file a lawsuit if they think your company’s financial problems aren’t short-term.
What options do you therefore have if your business is having trouble making mortgage payments? Essentially, you must free up enough money to settle the debts; this can be done by reorganising your company’s operations and/or bringing in new investment.
Sourcing alternative finance
Alternative financing, which is renowned for its flexibility, may be able to provide your business with the additional funding it requires to pay down its commercial mortgage. One alternative funding option that can be useful is invoice financing.
Both invoice factoring and invoice discounting are types of invoice financing that deliver recurring cash infusions throughout each month based on the value of your invoices. Each invoice normally has a portion released within 24 hours after issuance, and the remaining amount, less the lender’s fees, becomes available when your customer pays.
Your company may become more efficient and better prepared to handle the current financial difficulties after restructuring. Costs are often reduced as a result of streamlining, which also allows a company to run more quickly in the future.
What then does streamlining entail? In order for the company to pay its debts and gradually turn a profit, it can involve making layoffs or selling assets
Formal insolvency measures
As we previously stated, even if your business experiences financial difficulties, it is not required to shut down. It could be possible to formally bargain with creditors to pay a manageable sum each month if the company has multiple debts. A Company Voluntary Arrangement (CVA), as it is officially known, would free up funds to pay the mortgage.
If the pressure from creditors becomes too much, another alternative is company administration, which stops any legal action that has already been initiated and stops any planned legal action.
In times of financial difficulty where business owners find themselves unable to meet their commercial mortgage repayments, seeking independent insolvency advice becomes imperative. The expertise and guidance of insolvency professionals can provide crucial insights into available options, potential solutions, and legal obligations.
By consulting with these experts, business owners can gain a clear understanding of their financial situation, explore alternative repayment arrangements, negotiate with lenders, or consider formal insolvency procedures if necessary. It is crucial not to delay in seeking this advice, as early intervention can often lead to more favorable outcomes.
If you are facing challenges with your commercial mortgage repayments, take action today by completing our online enquiry form. By doing so, you can access the support and expertise you need to navigate this complex situation, protect your business’s interests, and work towards a brighter financial future.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.