10 ways to... deal with debt

If your debts are mounting, you need to take action fast. Follow these ten steps to get back on an even keel
  1. Don't ignore the problem - deal with your debts now. If you ignore bills, invoices and loan repayments, you could face losing your premises and equipment, County Court action, poor credit rating, losing valuable suppliers or, in the case of unpaid taxes, criminal prosecution.
  2. Get professional advice. Talk through your options with your bank manager and your accountant or call Business Debtline (0800 197 6026) for free advice and support in creating a debt-management plan.
  3. List all your debts. Work out exactly what you owe to each of your creditors and prioritise your debts. Give high priority to those that can lead to serious consequences, such as court action or eviction. Deal with these first.
  4. Talk to your creditors. Explain your situation and ask if they can be patient or flexible. Ask your bank for more time to repay loans and suppliers to give you extended credit.
  5. Create a balance sheet. Work out the monthly incomings and outgoings for your business. Calculate how much you can afford to pay each of your creditors every month. Even a token payment is better than nothing.
  6. Review your business expenditure and cut out wasteful spending. Small savings add up.
  7. Streamline your business to improve cashflow. Cut out slow-selling lines and focus on core products and services. Increase prices where you can and target existing customers to gain more business. If things do not improve, consider making staff redundant or relocating to cheaper premises.
  8. Consider consolidating your debts with a loan - but think carefully before doing so, especially if it will be secured against your house or premises. Speak with your bank or use an independent financial adviser to find the best deal for you.
  9. Look at what you take out of the business and reduce your wages if you can. It might be possible to claim state support, such as Working Tax Credit, to make up a shortfall until you get back on your feet.
  10. If you have exhausted all options and you are not able to clear your debts, you may have to declare yourself bankrupt or, if you are a limited company, liquidate your business. These are last resorts and can have serious long-term consequences - as an undischarged bankrupt, you cannot run a company, your credit is severely affected and you lose control of your assets, including your home.