Company Debt

Company debt is fairly common but presents a serious challenge for a business.

It’s also the main reason that directors come to us for assistance.

Debt can arise for a variety of reasons. We’ve listed some common and other less common reasons for debt issues:

Common reasons for company debt

• A major client has been placed into administration or liquidation and owed the business a significant sum.
• Rapid expansion has resulted in a business taking longer than expected to pay back its initial investment.
• A problematic project has run up additional, unexpected and significant costs (especially common in construction).
• Increases in price of suppliers / raw materials.
• Other businesses are moving into the market and are operating at a loss in order to take market share.
• Customers are not buying as much as they used to previously due to the economic situation.

Less common, but equally problematic

• A director or employee of the company committed a fraud and took money out of the business.
• The board could not agree on a way forward for the business.
• Tax issues with HMRC.

These are just a few of many examples of how a company might accrue debt.

If your business is struggling with debt there are solutions available to avoid liquidation. For example, a Company Voluntary Arrangement allows a company to continue trading while paying back creditor debts. Get in touch with Hudson Weir to find out your options.