What Are Your Options If Your Business Is in Debt?

Running a business comes with financial risks. If your company is struggling with debt, it’s important to know that business debt help is available—and acting early can make all the difference.

From improving cash flow to formal insolvency procedures like Company Voluntary Arrangements (CVAs) or company administration, there are several ways to regain control.

What Happens When a Business Is in Debt?

If your business can’t pay its bills on time, it may be insolvent. This can lead to:

• Pressure from creditors
• Legal action
• Potential liquidation

Early intervention is key. An experienced insolvency practitioner can help you explore options like informal payment plans or formal restructuring.

Are You Personally Liable for Business Debts?

Your liability depends on your business structure:

• Sole Traders: Personally liable. Your personal assets (e.g. home, car) are at risk.
• Limited Companies (LTD): Limited liability protects your personal assets—unless you’ve given a personal guarantee or acted fraudulently.

How Much Debt Is Too Much for a Business?

Some debt is normal, especially for growth. But if your business can’t meet its debt obligations based on realistic forecasts, it may be time to seek help.

Tip: Regularly review your debt-to-income ratio and cash flow projections.

Can Business Debt Be Written Off?

Yes, but only in specific cases:

• Creditors believe they won’t recover the debt
• A partial write-off allows continued trading
• A court orders it

However, unpaid debts can be pursued indefinitely and may lead to court action.

What If a Business Can’t Pay Its Debts?

If your company is insolvent, options include:

• Business recovery plans
• Business turnaround
• Company administration
• Company voluntary arrangement(CVA)

Each option has pros and cons—speak to a licensed insolvency practitioner to find the best fit.

Closing a Company with Debt: What Happens?

If recovery isn’t possible, liquidation may be necessary:

• Creditors’ Voluntary Liquidation (CVL): Initiated by directors
• Compulsory Liquidation: Ordered by the court

In both cases, business assets are sold to repay creditors. Remaining debts are written off—unless you’re personally liable.