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Advice to avoid business and company debt


Advice to avoid business and company debt  – The Do’s and don’ts of business debt

What you SHOULD DO:

Tackling high priority debts ensures that you will be able to explore all options before they are no longer available. Priority debts can include debts which could close down a business, leading
to other business critical utilities such as phones, electricity and gas to be shut down. Priority and Secondary debts are covered in more detail later in this pack.

Address government debts.

The highest priorities you should address as soon as possible are all debts and issues with HMRC, PAYE, National Insurance and other such obligations. Contact details for these are at the end of this pack. Talking to them may bring solutions to light that you hadn’t
previously considered.

Get in contact with everyone the business owes money to.

This will calm creditors who may pursue the business less intensely and preserve any bridges that may be needed in the future. It could prevent things from getting worse and by not contacting those that the business owes money to, any hopes of goodwill or lenience will disappear.

Keep copies of all correspondence

Keeping track of any letters, court forms, phone conversations and any other forms of communication with creditors will help you stay on top of an on-going situation and can prevent the process becoming overwhelming.

Read the small print.

Always understand all the technicalities when preparing to sign a loan, mortgage or any other type of monetary document. Do not agree to unrealistic payback terms or high interest rates, and do not borrow money you know that you will not be able to pay back.

Do your research.

And be well informed when selecting who to talk to and which options are available to you.

Seek multiple opinions.

To help prevent bad advice and get as much knowledge as possible before making important decisions.

Go to court hearings.

If you are called into a hearing, it does not mean the business is acting criminally. Court can often be the first step to resolution.

Take another look at your business budget.

From here you will be able to allocate funds and form a repayment plan which will give you clear targets to reach.

Speak to an advisor The UK Company Insolvency Helpline.

The UK Company Insolvency Helpline provide alot of information that can help you guide your business to recovery. All the team will provide will be as simple to understand as possible and just might highlight some options you didn’t know were available.

What you SHOULD NOT  DO:

Ignore the problem or put it on hold.

Your options will decrease the longer you leave things: interest rates will continue to pile up and you may find the business in a cycle that is extremely difficult to get out of. If the business’s finances mean that it can’t make payments you must talk to your creditors and work out new plans and agreements. Lenders can be more accommodating if you plan things well in advance and stay in constant contact with them. It reassures them that you plan to pay what is owed and as a result they may make allowances or be more flexible. Ignoring them will aggravate them and you will find options become
very limited.

Borrow money to pay off debts.

Without carefully thinking it through, you could end up further jeopardising your long term business recovery by looking for a quick, temporary fix.

Only pay the bare minimum.

Although you may want to keep some cash flow to help with day to day business functions, paying above the minimum will clear your debts quicker, reflect better on your credit score and will also demonstrate your repayment commitment to creditors.

Seek insolvency as your only option.

Although in some cases insolvency is the only viable option, many directors do not properly explore viable alternatives and may miss out on a solution that doesn’t involve insolvency.

Believe everything you hear.

If something sounds too good to be true, seek a second opinion. Some companies will provide bad advice on purpose to profit them or convince you that their service is your only way out. Always explore your options thoroughly and get advice from multiple sources before making a decision.

Be bullied or pressured.

Don’t let anyone make you feel that you need to act before considering all the options and have allowed time to read any agreements. Do not sign anything you don’t fully understand and always consult others before making a decision.

Make promises you cannot keep.

If a repayment plan has been agreed upon, ensure that the payments are at a level you can maintain. By arranging a repayment plan, creditors have already offered a measure of leniency, and not sticking to it may reflect badly on you and frustrate your creditors.

Give up.

If you are not getting what you feel is a fair repayment plan or financial agreement, keep trying. Even if creditors are being difficult, there are always compromises that can be made. Stay firm, polite and realistic, but if you are not presented with an ideal solution straight away, continue your negotiations.

A business should contact trusted sources or reputable business debt advice firms if in need of extra help or advice. Work out reasonable debt repayment schedules, no matter how small. This will settle creditors and may buy more time or flexibility. Act quickly – options will disappear the longer problems are left unresolved.

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