COMPANY DEBT PROBLEMS
When the company can't keep up with its debts.
If cashflow is no longer sufficient to pay creditors as they fall due, talking it through early gives you more room to consider your options.
Company Debtline gives you a confidential place to start.
- Free
- Confidential
- No obligation
Company debt problems — what directors should understand.
Speak to an Adviser
Tell us how to contact you and we’ll arrange a confidential conversation about your company’s position.
Free. Confidential. No obligation.
Prefer to choose a time? Book a call.Company debt problems rarely start overnight.
For many businesses, financial difficulty develops gradually. A customer pays late, VAT is deferred, supplier terms are stretched, or directors put more money into the company to keep things moving.
Before long, the business can find itself deciding which creditor to pay next rather than dealing with the underlying problem.
Financial difficulty does not automatically mean the company has to close. The earlier you understand the position, the more options you may still have.
RECOGNISING THE WARNING SIGNS
When normal cashflow pressure becomes something more serious.
Most businesses experience periods of financial pressure. The important point is recognising when a temporary cashflow problem may be developing into something more serious.
- Supplier invoices are regularly being paid late
- VAT, PAYE or Corporation Tax is overdue
- Wages or essential operating costs are becoming difficult to meet
- Directors are repeatedly putting personal money into the company
- Borrowing or credit cards are funding normal day-to-day costs
- Creditors are issuing final demands or threatening legal action
- The company is relying on future income to pay liabilities that are already due
- You are unsure whether the business can continue trading over the coming months
One warning sign on its own does not necessarily mean the company is insolvent. Several appearing together can indicate that the position needs to be reviewed properly.
What should you understand about the company’s position?
Before deciding what to do next, it helps to look at the company as a whole rather than focusing on one overdue creditor or one immediate payment.
- Cash available — Is there enough money coming into the business to meet liabilities as they fall due?
- Overdue liabilities — What is already owed to HMRC, suppliers, lenders, employees or other creditors?
- Immediate operating costs — Can the company continue to meet wages, rent, utilities and the other costs required to keep trading?
- Money owed to the company — Are customers or other businesses holding significant sums that could realistically be recovered?
- Assets and liabilities — What does the company own, what does it owe, and what are those assets realistically worth?
- Underlying viability — If the immediate debt and cashflow pressure were stabilised, would the business itself still be capable of trading profitably?
Looking at these areas together can help distinguish a temporary cashflow problem from a more serious financial position that may require professional insolvency advice.
What options may still be available?
The right way forward depends on why the company is struggling, how serious the financial pressure has become and whether the underlying business remains viable.
There is no single solution for every company. Understanding the position first helps identify which options are realistic and which may no longer be appropriate.
IMPROVE CASHFLOW
Recovering overdue customer debts, reducing costs or introducing additional working capital may help stabilise an otherwise viable business.
AGREE TIME WITH CREDITORS
Some creditors may be willing to agree revised payment terms. HMRC may also consider a Time to Pay arrangement where the company can demonstrate that future liabilities can be met.
RESTRUCTURE THE BUSINESS
Changes to finance, costs, operations or the way the company trades may sometimes provide a route forward where the underlying business remains viable.
FORMAL INSOLVENCY ADVICE
Where the company cannot realistically recover, advice from a licensed insolvency practitioner may be required to understand the formal options available.
The questions directors usually want answered first.
When company debt is becoming difficult to manage, the immediate concerns are usually whether the business can continue, what options remain available and whether the position could affect you personally.
Does company debt mean the business has to be liquidated?
No. Financial difficulty does not automatically mean liquidation is necessary. The important questions are whether the company can meet its liabilities, whether the underlying business remains viable and whether the financial problems can realistically be resolved.
Am I personally responsible for my company’s debts?
Normally, debts owed by a limited company belong to the company rather than its directors. However, personal guarantees, Director’s Loan Accounts and certain transactions can create personal exposure.
Can the company continue trading if it is struggling to pay creditors?
Potentially, but the circumstances matter. If insolvency may be developing, directors need to consider the company’s financial position carefully and should not simply continue trading without understanding the risks and the interests of creditors.
What if customers owe the company money?
Money owed to the company is an asset. If those debts are genuinely recoverable, collecting them may materially improve the company’s cashflow and overall financial position.
What if HMRC is one of the creditors?
HMRC arrears are common in financially distressed businesses. Depending on the circumstances, options may include discussing payment arrangements such as Time to Pay, but the company must also be able to deal with ongoing tax liabilities.
What happens if the company cannot realistically recover?
If the business is no longer viable or cannot realistically meet its liabilities, formal insolvency advice may be required. A licensed insolvency practitioner can explain the options available to the company, including whether liquidation or another formal process may be appropriate.
What happens when you speak to Company Debtline?
- 01
TALK
Tell us what is happening
Explain the pressures the company is facing, what is owed, who is chasing and anything you are particularly concerned about. You do not need to have all the figures or know what the solution should be.
- 02
UNDERSTAND
We look at the wider position
We help you consider the company’s cashflow, liabilities, creditor pressure, assets and underlying viability, together with any issues that may affect you personally as a director.
- 03
GET CLARITY
Understand what the position may mean
We explain the key issues in plain English so you can distinguish between a problem that may still be manageable and one that may require more urgent or specialist advice.
- 04
NEXT STEPS
Know what to do next
Where appropriate, we can help you understand the practical options available and whether you should speak to a licensed insolvency practitioner or another specialist professional.
Free and confidential guidance for directors of UK limited companies.
Not ready to speak to someone?
You can start with our Free Company Debt Assessment. Answer a few questions about the company’s financial position, creditor pressure and your circumstances to identify the areas that may need closer attention.
- Free to complete
- Takes only a few minutes
- Confidential
Frequently asked questions
How do I know if my company may be insolvent?
A company may be insolvent if it cannot pay its debts as they fall due or if the realistic value of its liabilities exceeds the value of its assets. The position is not always obvious from the accounts alone, particularly where cashflow is tight, customers owe money or assets may be difficult to realise.
Do I need up-to-date accounts before speaking to Company Debtline?
No. It is useful to have as much financial information as possible, but you do not need a complete set of management accounts before speaking to us. We can start with what you know about the company’s debts, cashflow, creditors, assets and current trading position.
Can the company continue trading while I decide what to do?
Possibly. Financial difficulty does not automatically mean a company must stop trading. However, where insolvency may be developing, directors need to keep the company’s position under review and consider the interests of creditors carefully. If there is significant uncertainty, professional advice should be obtained promptly.
What if HMRC or another creditor has already started legal action?
You should not ignore it. Final demands, court claims, statutory demands and winding-up action can materially increase the urgency of the situation. Company Debtline can help you understand what the action means and whether specialist advice should be obtained immediately.
Can Company Debtline help me understand issues that could affect me personally?
Yes. Although company debts normally belong to the company, issues such as Director’s Loan Accounts, personal guarantees, dividends, Bounce Back Loans and certain transactions can affect directors personally. We can help you identify those issues and understand when separate specialist advice may be appropriate.
Do I have to use a particular insolvency practitioner?
No. If formal insolvency advice appears appropriate, we can help you understand what to consider when choosing a licensed insolvency practitioner and, where appropriate, help you access suitable professional support. You remain free to decide who you wish to instruct.
Understand the position before the pressure increases.
You do not need to know the solution before you speak to us.
If your company is struggling to keep up with its debts, Company Debtline can help you understand the financial position, the options that may still be available and any issues that could affect you personally as a director.
Free · Confidential · Practical guidance