Our business is struggling because of one big company debt. Is there anyway we can pay this off over time or write it off?
This is a very common challenge for businesses. It also happens to be the single biggest reason that directors come to us for help.
The debt can arise for a number of varied reasons. Here is a list of the common and not so common reasons that debt has built up that we hear from directors.
Common reasons for company debt
- A major customer has gone into administration or liquidation and they owed us thousands of pounds. We never chased payment as they were good customers and always eventually paid...
- We are expanding rapidly and have lots of exciting new projects but they are taking longer to pay back the initial investment than anticipated. But they say they will if they have a bit more time.
- Just one project of many, hit major problems and drained our cash supply and delays meant that the customer did not pay on time. (typical for construction companies)
- The price of our main raw material are going up significantly and we simply can't pass on the costs to customers at this stage.
- Larger or smaller businesses are moving into the market and are operating at a loss in order to take market share.
- Our customers are simply not buying as much as they used to due to the current economic situation.
- Our invoicing and debtor collection systems simply didn't work efficiently and we haven't got enough money in.
Not so common but it happens!
- A director or employee of the company committed fraud and took money out of the business without our knowledge.
- Our accountant did not tell us what was the true position of the business.
- Our board could not agree on a way forward for the business and we have fallen out and/or been distracted by other things
- We never thought we would have to pay all this tax! HMRC haven't asked for any in the last 7 years and now they suddenly want £250k
- Our business was shut down for an extended period due to events outside of our control (weather, riots, strikes, disease, terrorism)
- A customer has refused to pay as there is a problem with our product/service
- Our refund policy has been called in many more times than we anticipated.
There is a saying in the turnaround business which is "we are where we are". So no matter what caused the company debt the directors needs to move forward and take action.
As a general rule if the business is viable, if it were not for this debt and a good proportion of the debt could be paid off over 3-5 years, then there is a chance of the business surviving by using a CVA. This would depend on the circumstances so to see if your company debts could be helped in this way then call our free phone number 08009700539
So how can we help with your company debt?
Well, there is a plan A, B, or C
Plan A is an informal agreement with the creditors. In the case of HMRC, we can negotiate time to pay arrangements which are backed up by comprehensive forecasts and a statement of affairs of the company's debts. This is not an insolvency event and the company's credit rating will not be affected. If other creditors are involved we can use the threat of insolvency that will leave the creditors more open to the something rather than nothing option.
Plan B is the use of an insolvency mechanism called the company voluntary arrangement whereby the creditors are bound by an agreement whereby a proportion of the debt is written off and the remainder paid over a number of years. This is binding on all creditors as long as 75% by value of the creditors agree. As HMRC are usually the largest creditor and they are on the whole supportive of the mechanism for the right company then there is a good chance of getting this approved.
Plan C is terminal insolvency whereby the company goes into administration or liquidation and is only really suitable if the company is no longer viable and/or the directors do not have the will to continue.
Note: We do not offer to repackage your company debt into one "manageable amount" which is more common practice in personal insolvency and we do not offer loans ourselves. We can put you in touch with people who can arrange finance if you wish.