Effective ways to reduce debt for your small business
Debt can feel like a heavy weight holding your small business back, affecting everything from cash flow to future growth. You’re not alone and there are plenty of organisations ready to offer expert guidance and support to help you tackle debt head-on.
Keep reading to discover how they can help you navigate financial challenges with practical steps and smart strategies, so you can take back control and set your business on a path to long-term stability.
Business Debtline
Business Debtline is a registered charity. They have trained advisers who provide free, impartial, expert debt advice to small business owners and the self-employed across England, Wales and Scotland.
You can contact them on 0800 197 6026 or by visiting vising Business Debtline for live chat and debt advice tools.
Citizens Advice
Citizens Advice offers free, confidential help with managing debt in England and Wales. They will help you assess your finances, prioritise payments, and support you with negotiations with your creditors. They explain options like Debt Management Plans, Debt Relief Orders, Individual Voluntary Arrangements or bankruptcy and provide advice on your legal rights.
You can contact them on the telephone 0800 240 4420 and you can also visit them by finding the nearest local branch. There are also similar services for advice in Scotland and Northern Ireland.
Are payment delays creating debt?
FSB Debt Recovery
FSB Debt Recovery is a service provided by the Federation of Small Businesses (FSB) to help small businesses across the UK recover unpaid debts from customers. It offers a range of debt collection solutions, from friendly reminders to formal legal action, and provides legal support through solicitors if necessary.
To access this help you'll need to be a member of the Federation of Small Businesses (FSB), after completing the membership registration process you can speak to the FSB support team.
Small Business Commissioner
The Small Business Commissioner (SBC) is an independent public body set up by Government under the Enterprise Act 2016 to tackle late payment and unfavourable payment practices in the private sector. The SBC offers advice, free dispute resolution services, and investigates complaints.
You can contact the Small Business Commissioner by using the online contact form on their website to submit queries or complaints. For direct assistance, you can call their helpline at 0330 355 7023 or email them at contact@smallbusinesscommissioner.gov.uk.
Steps to take if you’re falling into debt trouble
1. Review your cashflow
Reviewing cash flow is crucial for small businesses facing financial difficulties because it provides a clear picture of the business’s ability to meet its financial obligations. By regularly assessing cash flow, you can identify potential shortfalls and take corrective action before they become critical. This allows you to prioritise essential expenses, such as payroll and bills, and determine where you can cut costs or defer payments. The best thing to do is to contact the Business Debtline.
Regular financial assessments also help you with budgeting and forecasting, allowing you to plan for growth, manage unexpected expenses, and avoid financial surprises. Tracking your income and cash flow provides valuable insights into trends, enabling you to adjust strategies and make informed decisions.
2. Negotiate with creditors
Discussing payment terms with creditors is crucial for your small business if you're experiencing financial problems, as it helps manage cash flow and avoid bigger issues. By reaching out to your creditors, you may be able to get better payment terms, like longer deadlines or lower monthly payments.
Negotiating also lets you focus on paying essential expenses and tackle smaller debts over time, easing financial stress. In some cases, creditors may even freeze interest or fees, giving you more time to recover without accumulating additional debt.
Struggling to pay your energy bill? The Business Debtline state that energy is a priority debt. The first and most important thing to do if you’re struggling to pay your bills is to call your energy supplier. The sooner you talk to your supplier, the quicker they can help. At EDF, you'll speak to one of our dedicated business energy specialists on 0330 912 9959(1) - we can discuss consumption management, payment plans and tariff options.
3. Debt Management Plans and Individual Voluntary Arrangements - for sole traders and partnerships
A Debt Management Plan (DMP) is an informal agreement with your creditors, where you agree to make affordable monthly payments. This helps you pay off your debt over time without the stress of large payments, stops legal action, and gives you time to improve your finances. If your debt is with your energy provider, often they will offer you a payment plan to get back on track. Always reach out to your supplier if you’re struggling there are many ways they can help.
Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement that involves negotiating with your creditors to reduce the total amount owed. Often, you only pay a portion of the debt, with the remainder written off after a period, typically five years. IVAs can prevent bankruptcy, protect your assets, and help you avoid closure.
Both DMPs and IVAs can help sole traders and partnerships regain control of your finances. To learn more about your options, contact a debt advice service or a licensed insolvency practitioner. Services like National Debtline, Citizens Advice, and StepChange can guide you through the process.
Company Voluntary Agreements - for limited company
If your limited company is insolvent, it can use a Company Voluntary Arrangement (CVA) to pay creditors over a fixed period. If creditors agree, your limited company can continue trading.
Every business debt is different so if you’re business is in debt, or you feel like you’re heading that way - the best thing you can do is seek help and explore the option that is right for your business.
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