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If your company is dealing with unmanageable debt, time is very much of the essence. There are a range of company rescue and recovery options which can help turn around a business in debt, however, problems can quickly start to mount for the company if swift action is not taken. Managing business debts can be a complex affair, but rest assured, there is a solution out there to help your company overcome its current debt problems.
The best way to manage business debt is to keep a close eye on the company's cash flow position, and be prepared to take action if you suspect the debt level is getting to an unmanageable level.
Directors should be aware of the warning signs of problem business debt and be willing to take action if any of these signs are spotted:
When a company’s debt problems threaten the long-term viability of the business, swift action needs to be taken to stabilise its financial position. If an unmanageable business debt situation is ignored and left to continue, the company’s financial position is only likely to worsen which could lead to the company becoming insolvent and forced into compulsory liquidation by order of the courts.
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The good news is that there are a range of options available to limited companies that find themselves struggling with unmanageable and ever increasing business debt.
Depending on the financial and operational position of the company, and the likely viability of the business going forward, solutions may include placing the company into administration to allow for a process of restructuring to take place, formally negotiating with creditors via a legally binding Company Voluntary Arrangement (CVA), or exploring options for bringing the company to an orderly end through liquidation if business debts problems mean rescue is unachievable or undesirable.
“Spoke with Chris who put me at ease straight away. He was very knowledgeable and listened intently to all my worries and concerns. Will definitely be using Real Business Rescue and advise anyone with business issues to give them a call.”
Diana
When a business is incorporated as a limited company, its directors are afforded a level of protection through limited liability. A limited company is classed as its own legal entity, and therefore responsible for its own debts. If a limited company becomes insolvent, therefore, and is unable to repay its business debts, its directors will not be held personally responsible for repaying any outstanding amount owed.
The exception to this is if the director has signed a personal guarantee to underpin any of the company’s borrowings. In this instance, the personal guarantee will crystalise upon the company entering into formal insolvency proceedings, and responsibility for the associated business debt will transfer to the director who provided the guarantee.
If your business has multiple debts that it’s struggling to repay, consolidating those debts is one potential solution that could help you get back on track. So what is business debt consolidation?
Debt consolidation is the process of combining various debts that you owe to different creditors into a single debt that you can repay more easily. Debt consolidation works on the idea that your company borrows enough money to pay off your suppliers, lenders, landlords, utility companies, HMRC and any other creditors you have and instead owe money to just one lender at a lower monthly cost.
There are several benefits of business debt consolidation loans, including:
There are also a few things to consider before going ahead with a debt consolidation loan. First, if you extend the repayment schedule then you will repay more overall. There may also be early repayment penalties to pay when you settle your existing debts.
Debt consolidation is not something which is right for all companies. Adding yet more debt onto an already indebted company can often make the situation worse. Before taking out further borrowing, you should be sure your company is in the position to stick to the monthly repayments for the duration of the loan, and that the money is actually used to clear your existing borrowing and does not simply become an additional debt.
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If your business incurs a bad debt it means one of your customers hasn’t paid for the service or product provided, and the situation has gone on so long that this sum needs to be declared as lost and written off in your books.
Failing to deal with frequent or high levels of bad debt can cause your business to decline, and suggests changes need to be made to your current credit control and credit management procedures. It’s possible to reduce the risk of bad debt by setting up effective policies and procedures around credit management, and making sure strong internal control systems are in place. Here are some ways of improving your processes:
If your company is struggling with unmanageable debts, squeezed cash flow, or an uncertain future, you are far from alone. We speak to company directors just like you every single day, and we are here to give you the help and advice you need.
Call our team today on 0800 644 6080
If your company is experiencing financial difficulties and escalating business debt, Real Business Rescue has a team of licensed insolvency experts who can help you work through your current situation.
We can talk you through a range of business rescue and recovery options to help you get your business back on track, or alternatively we can discuss the best way of closing your company should you want to walk away for good. Call us today to arrange a free no-obligation company debt consultation with a licensed insolvency practitioner.
Still unsure whether liquidation is right for your company? Don't worry, the experts at Real Business Rescue are here to help. Our licensed insolvency practitioners will take the time to understand the problems your company is facing before recommending the best course of action going forward based on your own unique circumstances.
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