Business debts

Running a business can be very stressful, and managing cashflow can bring a lot of pressure – especially if your customers don’t pay their invoices on time, and your suppliers insist on prompt payment.

It is very common for businesses to find themselves short of money – and it’s common for problems to accelerate, leading to a vast amount of business debt.

If you’re in this situation, we can help. PayPlan have decades of experience in helping people to get their finances back on track – so if you are struggling, get in touch and let us help you.

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What options are available for business debts?

If you have business debts – whether you’re a sole trader or the director of a limited company – and you are struggling to afford the repayments, it does not automatically mean that you cannot continue trading.

If your business is viable, there are several debt solutions available where you can carry on running your business. If your business is loss-making, then you may need to consider closing it, because trading while you’re insolvent is likely to just increase your debts.

If you are a Director of a Limited Company, trading while insolvent is a very serious offence.  

Here are the options that could available if your business is viable:

  • Protected Trust Deed
This is an agreement between you and your creditors whereby you pay a percentage of what you owe, and your unsecured creditors will write off the rest.

You must pay for a certain time period – however this is usually only for 4 years, and you only make one single monthly payment that is realistic and affordable. You will always have enough to live on, but at the same time you will be getting on top of your debts.

If you can get a Protected Trust Deed, your assets will also be protected. A Protected Trust Deed will also help you avoid sequestration and all the unsettling consequences that come with it. Sole Traders, Partnerships and Limited Companies can all enter a Trust Deed.

  • Debt Arrangement Scheme (DAS) for Businesses
Business DAS is a way for businesses to repay their debts in full – but at a reduced rate and over a longer period of time. While you’re making your payments, interest & charges are frozen, and any further legal action is prevented.

If you are a Sole Trader, all your unsecured debts (both personal debts and those incurred for your business) are considered as personal debts – so you can apply for normal DAS.

If your business has debts – and you are trading as a Partnership, a Trust or an ‘Unincorporated Body of Persons’ – you will need to enter a Business DAS. Unlike a normal DAS, the Business DAS can only last for a maximum of 5 years, so you will need to be able to repay your unsecured business debts in full within this timeframe. Your business can keep trading while in a Business DAS.

Important Note: Limited Companies cannot use Business DAS.

  • Debt Management Plan (DMP)
A DMP is a flexible plan that enables you to pay your debts off at a more affordable rate.

This may allow you to continue trading your business – however, it does not give you the protection from legal action or additional interest & charges that the Debt Arrangement Scheme (DAS) gives you (see above).

  • Sequestration
If you petition for your own sequestration – or your creditor(s) petition for your sequestration – you will no longer be pursued by your creditors for your unsecured business or personal debts.

However, any business and/or personal assets could be sold for the benefit of your creditors, which is likely to make it difficult to continue trading. 

We are experts in finding business debt solutions. We understand you need your income, so we will look at every option – and do whatever we can – to ensure you can carry on trading. We offer FREE and confidential advice, so if you need help please get in touch.

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