10 practical steps to help resolve debt problems

Your business should be prepared to take prompt action to resolve any issues around debt.

If your business cannot service its debts, it’s no good burying your head in the sand. You must take action quickly.

Here are 10 practical steps that you can take to try and deal with the situation.

1. Work out a budget and deal with priority debts +

Business Debtline offers useful information on how to work out a budgetLink opens in a new window.

Priority debts would 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

2. Consolidate or refinance loans +

It may make sense to:

  • consolidate a number of loans into one payment
  • refinance a single loan

You can read more about these approaches to restructuring debt on this page.

However, it's important to seek independent advice before doing anything around consolidating or refinancing loans.

3. Get help with late-paying customers +

If your business has customers who are late with their payments, you can contact the Small Business Commissioner (SBC)Link opens in a new window for help with getting the issue resolved.

The SBC:

  • considers complaints from small businesses (that is, businesses with fewer than 50 staff) about payment problems they are encountering with their larger business customers (those with more than 50 employees)
  • makes non-binding recommendations on how the parties should resolve their disputes

Note, though, that it won’t get involved if litigation is underway between you and your debtor.

The SBC also has advice on what you can do to get your invoices paid on timeLink opens in a new window.

And when a person or business owes you money, you have a number of other options. Visit the GOV.UK websiteLink opens in a new window for further information.

4. Gain better control over your cashflow +

There are a number of other steps you can take to better manage your business' cashflow.

As it’s such an important topic, we’ve devoted an entire article to it. Learn more about managing cashflow

5. Reduce unnecessary spending +

You should also seek to cut unnecessary expenditure.

For instance, don’t allow your insurance to automatically renew. Instead, make a yearly habit of re-evaluating what you need, then assessing the services of a number of different insurers.

Similarly, you can often find office supplies more cheaply if you shop around.

6. Boost your revenue +

Look for ways to increase your revenue.

Some methods for boosting the amount of money you have coming in to your business include:

  • increasing leads to attract more customers
  • raising your rates
  • finding more ways to cross-sell or upsell your services or products

7. Engage your staff and seek their input +

In relation to points 5 and 6 around cutting spending and boosting revenue, it makes sense to actively engage your staff in this process. They may well have ideas that are well worth putting into practice.

Moreover, a crisis can be an opportunity for team-building.

8. Consider your emotional wellbeing when tackling debt +

You need to think clearly to deal with debt. Don’t underestimate the emotional damage that stress over debt can inflict on you.

Learn from the experiences of other businesses when it comes to maintaining your mojo, and don’t be afraid to seek professional advice, if necessary.

Also remember that you have a duty to manage the mental health and wellbeing of your staff too.

9. Avoid debt in favour of other forms of finance +

Perhaps you can consider raising funds to pay down your debts? It certainly won’t be easy as a business free from debt is often a better investment proposition than one in financial difficulties. Still, you could explore the following:

  • Borrowing from friends or family. Although this could put a strain on those relationships.
  • Liquidating assets. Creditors may accept this as they’ll want to be paid at least something, and they would stand to obtain more than if you wound up the business.
  • Look for a new cornerstone investor. If your business is just going through a rough patch and is otherwise viable, this may be an option worth looking into. However, the investor will quite likely demand a large equity stake in your venture.
  • Peer-to-peer lending or equity crowdfunding. These are worth exploring if you either want to raise debt at a set interest rate over a pre-determined period (via peer-to-peer lending) or sell a stake in your business via equity crowdfunding. Before proceeding with either of these options, however, you should seek independent financial advice.

10. Make sure you're getting fair treatment from lenders +

You’re entitled to be treated fairly by your bank or building society. The Lending Standards Board (LSB)Link opens in a new window operates as an independent body (albeit one funded by its registered financial firms), with an independent board made up of non-executive directors. It has voluntary Standards of Lending PracticeLink opens in a new window for business customers.

If you have a complaint about credit or borrowing money, contact your bank or building society for details of its complaints process.

If your complaint doesn't yield a suitable outcome, you may also want to contact the Financial Ombudsman Service for small businessesLink opens in a new window. This free and easy-to-use service has the power to settle complaints between small businesses and financial services providers.

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Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.