Dealing with business debt can be every bit as harrowing as dealing with personal debt difficulties.
Companies of all sizes — from tiny private companies to big international corporations — use lines of credit to launch, build and operate their businesses, and it is almost inevitable that at some point, some of those firms will encounter problems in repaying those debts.
The number of businesses that failed during the financial crisis shows that no company can consider itself immune to such issues, particularly at times when banks and other lenders may themselves be experiencing difficulties and looking to reduce or restrict the availability of credit — a problem that many small and medium enterprises, in particular, have had to face in recent years.
Borrowing for business purposes can take a number of different forms, from start-up loans and company credit cards, to business account overdrafts and beyond. Some lenders may insist on personal guarantees against lending for small businesses, and this presents a further potential danger, as defaulting business debts may then affect the company owner’s personal credit.
No business exists in a vacuum — all companies form part of a complex chain that may involve personal customers, corporate clients, contractors and suppliers. When another company or individual in your supply chain experiences financial difficulties, this will almost inevitably have a knock-on effect on your business. When a client or customer is unable to pay your invoice, this can all too easily lead to the risk of arrears building on your company’s credit commitments.
The golden rules for dealing with a company’s defaulting debts are surprisingly similar to the advice given to those with personal debt problems. Contact your bank or lender as soon as you know there may be a problem in meeting your commitments — if the problem is likely to be short-term, you may be able to either restructure your debts, or reach a mutually acceptable agreement for repayment of any outstanding amounts.
Failing this, there is help and advice available from both charitable organisations, and companies that can help you actively develop a plan to manage your debt.
The charity Business Debtline, for example, was set up to provide confidential and free advice to small businesses to help them deal with understanding issues like business debt collection, business debt recovery and ultimately developing a strategy to help your business deal with debt problems:
The charity doesn’t cover Northern Ireland, but advice about handling business debts can be obtained from organisations such as Citizens Advice Northern Ireland or Debtline NI.
Some debt charities warn against consulting debt advice companies that charge a fee. If you do speak to a debt adviser, make sure that they haves experience of handling business debts for companies like yours.
Remember is help out there, and it’s not necessary to deal with business debt problems alone.