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. As fully trained insolvency practitioners, we might advise, 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.