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How can I consolidate my business debt?

When your business runs into debt, whether it is because of a bad debt, cash flow issues or a slowdown in business, you will need to look into the options to deal with it and hopefully turn the business around in the process. One option is to do this by consolidating your business debt and there are a number of methods available to help you do this.

What are the options available?

Dependent on your business’ situation, there are a number of options which can be beneficial when you are looking to consolidate your business’ debt. They are:

  • Company voluntary arrangement (CVA) – This procedure allows limited companies to consolidate their debts, repay them over the CVA term (usually five years) and continue to trade to turn the business around. It is a rescue device for insolvent companies and if creditors agree to the terms of the CVA it can be a great way to ensure a company stays open and operating. It also provides the directors with the time and security to look into restructuring and diversifying their offerings to become more successful in future. For more information regarding CVAs, visit our dedicated CVA page.
  • Individual voluntary arrangement (IVA) – An IVA works in a similar way to a CVA but it is designed for personal and sole trader debts. Again, it allows individuals to consolidate their debts (business and personal), repaying what they can afford over five years and continue to trade with their business. This can be an extremely beneficial procedure for sole traders as they are personally liable for any business debts and IVAs can place a protective arm around the business to continue trading without fear of legal action. For more information regarding IVAs, visit our IVA page.
  • Partnership voluntary arrangement (IVA) – Again a similar process as outlined above but concerns partnership debts. An individual partner may simultaneously have an IVA for a personal debt.
  • Refinancing – This is where all business debts are consolidated into one debt or where various debts are restructured with a view to making repayments more affordable. It can allow a business to find a more favourable rate and focus on one repayment rather than multiple ones. Refinancing can also provide directors with the opportunity to renegotiate the terms of their debts to lengthen or shorten the term dependent on the business’ needs. This can help a business to deal with their cash flow and the debts that they have much better. However, the business will need to be able to afford repayments and lenders may refuse to lend to a business in some situations. Find out more on WF Financial Solutions refinancing page.
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Are there any other options available for dealing with business debt?

There are a couple of other insolvency options that can help you deal with business debt which may be more suitable for your business’ current situation. They are:

  • Administration – This is a process for insolvent companies which can provide them with protection from their creditors whilst a plan is put together to help restructure the company or sell the business and assets as a going concern. Administration allows a business to carry on trading after restructuring or sell the business to new owners or previous shareholders via a pre-pack administration. To find out more about administration, visit our dedicated administration webpage.
  • Creditors voluntary liquidation (CVL) – This procedure is used to close a company when it is insolvent. In some cases the owners of the old company have the ability to buy the assets from the liquidator and continue trading the business in the name of a new entity. In this situation the owners of the new entity have the opportunity to reappraise and rearrange the financial structure of the business. For more information regarding CVLs, visit our dedicated CVL page.

If you are struggling with business debt, get in touch with us on 0800 901 2488 as soon as possible. Our knowledgeable advisers can help you deal with your business’ current financial situation and get you back on track or help you to close your company down.

Authored by Phil Meekin

Phil Meekin

Head of Marketing