Business Debt Help for Limited Company Directors
If your limited company is struggling to pay HMRC, suppliers, lenders or other creditors, acting early can give you more options.
Business debt does not automatically mean your company has to close. Depending on whether the business remains viable, possible solutions can include negotiating with creditors, restructuring borrowing, HMRC Time to Pay, a Company Voluntary Arrangement (CVA) or Administration.
Where recovery is no longer realistic, a Creditors’ Voluntary Liquidation (CVL) may provide an orderly way to close the company.
💡 Quick Answer
If your limited company cannot keep up with its debts, the right solution depends on whether the business can realistically recover.
- negotiate revised payment terms with creditors;
- restructure or refinance business debt;
- ask HMRC for a Time to Pay arrangement;
- consider a CVA or Administration if the company remains viable; or
- consider CVL if the business cannot realistically continue.
If the company may already be insolvent, directors should also consider their duties towards creditors before taking further financial decisions.
When Does Business Debt Become a Serious Problem?
Most companies use some form of credit.
The warning sign is not simply having debt, but regularly being unable to meet liabilities as they fall due.
Signs that company debt is becoming serious can include:
- paying suppliers late;
- falling behind with VAT, PAYE or Corporation Tax;
- using new borrowing to meet old repayments;
- missing loan or business-finance payments;
- struggling to pay wages;
- receiving final demands or debt collection letters;
- County Court Judgments; or
- threats of statutory demands or winding-up proceedings.
A company may be insolvent where it cannot pay its debts when they become due or where its liabilities exceed its assets.
Insolvency does not automatically mean the company must close, but directors should understand their options quickly.
What Should a Director Do First?
The first step is to establish how serious the position really is.
Look at:
- the cash currently available;
- payments due over the next few weeks;
- overdue creditors;
- money owed to the company;
- company assets and liabilities;
- expected future cash flow; and
- whether the underlying business is still viable.
A temporary cash-flow shortage in an otherwise profitable company is very different from a business that is continually making losses.
If the company is already insolvent, directors’ responsibilities increasingly shift towards protecting creditors.
Our guide to director duties when facing insolvency explains this in more detail.
What Types of Business Debt Can Cause Problems?
Limited companies can come under pressure from several types of debt.
HMRC Debt
VAT, PAYE and Corporation Tax arrears can escalate if payments are repeatedly missed.
HMRC may consider a payment arrangement where a company cannot pay immediately but can afford instalments.
Read our HMRC Tax Debt guide or our guide to HMRC Time to Pay arrangements.
Supplier and Trade Creditor Debt
Late supplier payments can lead to stopped supplies, legal claims or more serious creditor action.
If several creditors are overdue, it may be time to assess the company’s overall position rather than dealing with each problem separately.
Business Loans and Finance
Bank loans, merchant cash advances, asset finance and other borrowing can become difficult to manage when revenue falls.
The options can depend on the finance agreement, any security provided and whether directors have signed personal guarantees.
Our lender-specific guides include help for directors who cannot pay Funding Circle or cannot pay iwoca.
Rent, Utilities and Other Trading Costs
Rent arrears, utility bills, insurance and wages can indicate that the company is facing a wider cash-flow problem rather than one isolated debt.
Can You Negotiate With Business Creditors?
Potentially.
Where financial difficulties are temporary, creditors may agree to:
- extend payment deadlines;
- accept instalments;
- reduce repayments temporarily; or
- agree another informal arrangement.
This can work where the business remains viable and the company can realistically keep to the new terms.
Our guide to dealing with creditors when your company cannot pay covers this in more detail.
Can Business Debt Be Restructured?
Yes.
Debt restructuring involves changing the terms or structure of existing borrowing to make repayments more manageable.
This might include:
- extending repayment periods;
- changing payment schedules;
- negotiating with lenders; or
- refinancing existing borrowing.
It is most useful where the underlying business remains viable but the current debt structure is putting too much pressure on cash flow.
See our guide to business debt restructuring.
Can Business Debts Be Consolidated?
In some cases, several business debts can be refinanced into a different facility.
This should not be confused with an insolvency procedure.
Debt consolidation changes how the borrowing is structured. It does not automatically reduce the total amount owed or solve a fundamentally unviable business.
See our guide to business debt consolidation.
Can HMRC Give a Company More Time to Pay?
Potentially.
HMRC may agree a Time to Pay arrangement allowing tax arrears to be repaid by instalments.
The proposal needs to be realistic and affordable.
A Time to Pay arrangement spreads the debt rather than writing it off.
If the company cannot afford a sensible repayment arrangement, a wider restructuring or insolvency solution may need to be considered.
Can a CVA Help With Business Debt?
A Company Voluntary Arrangement (CVA) is a formal agreement between an insolvent company and its creditors.
It can allow a viable business to continue trading while repaying an agreed proportion of its debts over time.
A CVA may be suitable where:
- the core business remains viable;
- historic debt is the main problem;
- future cash flow can support repayments; and
- creditors are likely to receive a better outcome than through immediate liquidation.
Read our Company Voluntary Arrangement guide.
Could Administration Rescue the Company?
Administration is another formal insolvency procedure.
An insolvency practitioner takes control of the company as administrator, while a statutory moratorium generally restricts creditors from starting or continuing certain legal action without permission.
Administration may be used where there is a realistic prospect of:
- rescuing the company;
- selling the underlying business; or
- achieving a better result for creditors than immediate liquidation.
Read our company Administration guide.
What if the Company Cannot Realistically Repay Its Debts?
Sometimes rescue is no longer realistic.
If the company is insolvent and there is no credible route back to sustainable trading, continuing to accumulate further debt can worsen the position for creditors.
Directors may instead consider a Creditors’ Voluntary Liquidation (CVL).
A licensed insolvency practitioner deals with the liquidation, company assets are realised and available funds are distributed according to insolvency rules.
Read our complete guide to Creditors’ Voluntary Liquidation.
What Happens if Creditors Take Legal Action?
Ignoring creditor pressure can allow the situation to escalate.
This may include:
- formal demands;
- court claims;
- County Court Judgments;
- enforcement action;
- statutory demands; and
- winding-up proceedings.
Our County Court Judgment guide explains what a CCJ can mean for a limited company.
If a creditor is threatening to close the business, read our winding-up petition guide.
Am I Personally Liable for My Company's Debts?
Usually, company debts belong to the limited company rather than its directors personally.
However, personal exposure can arise in some circumstances, including where:
- a director has signed a personal guarantee;
- there is an overdrawn director’s loan account;
- wrongful or fraudulent trading is established;
- misfeasance or other misconduct occurs; or
- specific statutory rules create personal liability.
Read our guide to when directors can become personally liable for company debts.
Can I Continue Trading if My Company Has Debts?
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Having debt does not itself stop a company from trading.
The more important question is whether continuing to trade is likely to improve or worsen the position for creditors.
Where the business is still viable and has a credible rescue plan, continued trading may be appropriate.
Where losses are continuing with no realistic recovery plan, directors should take advice before the position deteriorates further.
Free Business Debt Helpline for Company Directors
You do not need to wait until HMRC or another creditor starts legal action before asking for help.
Business Helpline provides free, confidential and unbiased initial advice to UK limited company directors experiencing financial difficulty.
We can help you understand:
- how serious the debt position has become;
- whether the company appears viable;
- what creditor pressure means;
- whether rescue or restructuring may be realistic;
- what formal insolvency options are available; and
- whether closure may now be the safer option.
Where a formal insolvency procedure is appropriate, this must be handled by a licensed insolvency practitioner.
Call our free 24-hour helpline on 0800 088 2142 or request a confidential call back.
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I have greatly appreciated your calm, straightforward support. My allocated Insolvency Administrator has been a reassuringly human part of a process that would otherwise have been very confusing and even more distressing than it already felt having to lose the company. Few of us study insolvency law in any depth since we rightly focus on the notion that our endeavours will be successful. Yet, when life's twists and challenges become unsurmountable, being able to turn to consummate professionals like Business Helpline for support has been of the greatest value. In times of need, these are people to trust. Thank you.
I have greatly appreciated your calm, straightforward support. My allocated Insolvency Administrator has been a reassuringly human part of a process that would otherwise have been very confusing and even more distressing than it already felt having to lose the company. Few of us study insolvency law in any depth since we rightly focus on the notion that our endeavours will be successful. Yet, when life's twists and challenges become unsurmountable, being able to turn to consummate professionals like Business Helpline for support has been of the greatest value. In times of need, these are people to trust. Thank you.
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It would not have been possible without Steven and Stan guiding me through the whole process. Absolutely brilliant guys to have on your side if the need be.
I throughly recommend them to anyone. Five star treatment all the way through.
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Highly recommended service, thank you Chris!
I strongly recommend Business Helpline and it is my intention to stay in contact with them, as my own business journey continues.
I strongly recommend Business Helpline and it is my intention to stay in contact with them, as my own business journey continues.
Frequently Asked Questions
Can business debt be written off?
There is no general right to have company debt written off because it has become unaffordable. However, some formal insolvency procedures can compromise creditor claims, while unpaid company liabilities are dealt with through liquidation where a company closes.
Can I negotiate directly with business creditors?
Yes. Creditors may agree revised payment terms where they believe an arrangement gives them a realistic prospect of repayment.
Am I personally liable for business debt?
Usually not simply because you are a director, but personal liability can arise through personal guarantees, director loan accounts, misconduct or certain statutory provisions.
Can a company recover from serious debt?
Yes, where the underlying business remains viable. Options can include creditor agreements, refinancing, restructuring, a CVA or Administration.
What happens if I ignore company debts?
Creditors may escalate matters through court proceedings, enforcement or, in qualifying circumstances, winding-up action. Early engagement usually leaves more options available.
