Starting, running and growing a business can be expensive, and it’s not uncommon for businesses to carry some debt through their journey.
But sometimes debt can build and start to feel overwhelming, having a negative impact on the business, the business owners.
The good news is there is a lot of help and support available for businesses struggling with debt management. Below you’ll find some helpful information if you’re worried about debt within your business.
Business Debtline
Run by the Money Advice Service, Business Debtline is a charity that provides free debt advice to the self employed and SMEs. Over 50% of the businesses that receive support from Business Debtline continue to trade.
As well as offering a range of debt advice fact sheets on topics including:
The Business Debtline also has a team of advisers with an expert knowledge of debt advice. You can speak to advisers over the phone or online via email or webchat.
An online sample letter library also allows businesses to write to creditors using prepopulated letters that contain all the relevant information. Each sample letter explains how and when to use it.
To find out more about the Business Debtline and the support it offers, visit www.businessdebtline.org
Increase your business income
There are various different ways to increase your business income; from funding and grants and enterprise agencies to reviewing your pricing and increasing sales.
It’s also helpful to review if customers are paying you on time. Late payments are a huge issue for SMEs. Remember, if your business is suffering because of late payments, you can get free help and support from the Small Business Commissioner – 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.
Compile a business budget
Creating a budget is an essential first step in managing business debt. It helps you identify how much money is coming into the business, how much is going out, and where you can make savings. It also gives you starting point for what available income you have to pay off your debts.
Deal with your priority debts
Priority debts are considered to be those that will have the most impact on your business, and you personally, if creditors begin action. For example, this may be rent payments for your business premises; utility payments like gas, electric and water; or where the creditor can remove belongings from the business or ask a magistrates’ court to send you to prison.
As long as you act quickly, it’s possible to manage priority debts early and limit any further negative impact on the business.
Deal with your non-priority debts
Non-priority debts are characterised as debts where the creditor cannot impose additional powers to collect payment. For that reason you have more time to agree a solution.
Debt management plans are an effective way to reach an agreement with creditors and begin making small repayments. You can find more information about debt management plans below.
Find out more on the Business Debtline website
An agreement between a business and its creditors to pay off any outstanding debts, a Debt Management Plan is a good option for businesses that:
Debt management plans can be drawn up and agreed directly with creditors, or through a licensed debt management company. If you decide to use the services of a debt management company, payments are made to the debt management company who then pay creditors.
It’s important to remember that Debt Management Companies will charge a fee for their services. Make sure you understand the costs of your plan and how you pay for it before signing any contracts.
Find out more about Debt Management Plans on GOV.UK
As the cost of living goes up, businesses across the North East are increasingly concerned about rising costs, inflation and possible recession, with many looking for ways to bring their expenditure down.
A new cost of living toolkit toolkit on the North East Growth Hub brings together the latest information on reducing costs within a business – from cutting energy bills to accessing government support – as well as supporting staff through the cost of living crisis.
Visit the cost of living toolkit to find out more
