What to do when your business is in debt

Look your business debts in the faceBusinesses often find themselves in debt for a variety of reasons. Perhaps they made a large purchase that they couldn’t afford, or maybe they extended too much credit to customers who didn’t pay their bills. Whatever the cause, being in debt can be a stressful and difficult situation.

The first step for any business in this situation is to create a plan for getting out of debt. This may involve making some tough decisions, such as cutting expenses or selling off assets. However, with a clear plan and a determination to succeed, it is possible for businesses to get back on solid financial footing.

My company is in debt what do I do?

If your company is in debt and you find yourself in this situation, it is important to take action quickly to get your business back on track. The first step is to create a realistic budget and stick to it. This will help you to get a better handle on your expenses and income.

It is also important to focus on bringing in more revenue and paying off debts as quickly as possible. If you are struggling to make ends meet, you may need to consider taking out a loan or borrowing money from friends or family. Whatever you do, don’t let debt continue to drag your business down. Take action today to get your finances back under control.

Some debts will be more urgent than others examples of these priority debts may include:

  • business rates
  • utility bills
  • mortgage and rent payments
  • tax bills
  • payments to strategic suppliers
  • bank loans
  • any form of borrowing with a personal guarantee

Communicate with your creditors

Creditors communication is crucial when a business is struggling with debt. creditors need to be kept updated on the status of the business and its ability to repay the debt. The creditors may be willing to work with the business if they are kept informed of the situation. creditors may be willing to extend the terms of the loan, lower the interest rate, or even forgive part of the debt.

However, creditors are more likely to work with a business that communicates openly and honestly about its financial situation. If a business is not willing to communicate with creditors, it is less likely to receive any type of relief. When a business is struggling with debt, communication with creditors is essential.

Involve your directors and senior managers

It’s been said that the first step in turnaround or restructuring is involving your directors and senior managers. The logic is simple: turnaround and restructuring are journeys that can only be successful if everyone is heading in the same direction. By getting your directors and senior managers on board, you ensure that everyone is committed to the same goal and that there is buy-in at all levels of the organisation.

This doesn’t mean that turnaround and restructuring are easy journeys; but by involving your directors and senior managers, you greatly increase the chances of success.

Seek expert guidance

When your business is struggling to make ends meet, it can be tempting to try to handle the situation on your own. However, if you’re dealing with serious financial problems, it’s important to seek professional help. An insolvency practitioner can provide you with expert guidance on the best way to deal with your debts.

They will work with you to assess your financial situation and come up with a plan to get your business back on track. This may involve negotiating with creditors, restructing your finances, or even closing down your business. Whatever the outcome, an insolvency practitioner will ensure that you get the best possible result for your company.

Improve cashflow as much as you can

As a business owner, one of your top priorities should be ensuring that your business has a healthy cash flow. That means collecting payments from customers in a timely manner and keeping expenses under control. Unfortunately, many businesses struggle with slow-paying customers, which can put a strain on their cash flow. If you find yourself in this situation, there are a few things you can do to improve the situation.

First, try to negotiate longer payment terms with your suppliers. This will give you more time to collect payments from your customers. Second, consider offering discounts for early payments. This mayincentivize your customers to pay their invoices more quickly. Finally, keep tabs on your expenses and try to reduce or eliminate any unnecessary costs. By taking these steps, you can help improve your business’s cash flow and keep your business running smoothly.

Explore ways to raise funds

Businesses need money to grow, and there are a number of ways to raise funds. One option is invoice finance, which allows businesses to borrow against the value of their outstanding invoices. This can be a costly option, but it can provide much-needed cash flow in a pinch.

Another option is to take out a business loan from a bank or other financial institution. This can be a good option for businesses with strong credit scores, but it can be difficult to qualify for and may come with high interest rates. Finally, businesses can also seek investment from venture capitalists or other investors.

This can be a great way to get funding for high-growth businesses, but it can be difficult to find investors who are willing to take on risk. Whatever option you choose, make sure you do your research and understand the costs and risks involved.

Find an insolvency practitioner (If you need one)

If your business has failed and you are struggling to pay your debts, you may need to consider insolvency. This is a legal process that can help you to pay off your debts and restart your business. To do this, you will need to find an insolvency practitioner. This is a professional who specializes in this area of law and can help you to navigate the process.

They will work with you to assess your financial situation and come up with a plan to repay your debts. This may involve selling some of your assets, or it may involve negotiating with your creditors. However, it is important to remember that insolvency is a last resort. If you are struggling to pay your debts, you should first try to negotiate with your creditors or get advice from a financial advisor.

Business in debt advice

If your business is in debt and you are worried what to do, our team of insolvency professionals are available to have a chat though your situation with free advice, simply complete the online enquiry form and one of the team will contact you.

Steve Jones Profile
Insolvency & Restructuring Expert at Business Insolvency Helpline

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.