Managing business debt: practical steps to stay in control

Borrowing is a normal part of running and growing a business. It bridges seasonal dips, supports investment and helps you navigate large orders. Problems only start when visibility slips, costs increase or deadlines are missed.

The aim is simple: know your obligations, keep headroom and act early.

This guide distils the key practices that keep debt manageable and cashflow steady.

1. Build a clear picture of your position

A 12-week rolling cashflow—updated weekly—is the most useful tool you can have. Map inflows and outflows, then add simple stresses such as sales falling 10% or receipts arriving 30 days late. If this highlights a crunch point, deal with it before it hits.

Keep the discipline tight:

• Review aged receivables and payables weekly; tackle the biggest and oldest items first.
• Recalculate loan covenants, headroom and any downside breach dates.
• Keep a calendar of VAT, PAYE, corporation tax, rent, utilities and scheduled repayments, with reminders 10 working days before due dates.

Assign ownership for chasing and negotiating. A short weekly review turns debt control into habit.

2. Anchor decisions to today’s costs and rules

Know the current rates shaping your obligations:

• Bank Rate (autumn 2025): 4.0%
• HMRC late payment interest: Bank Rate + 4% (from April 2025)
• Statutory interest on late B2B invoices: 8% above Bank Rate

HMRC arrears are now often more expensive than bank borrowing. Keep filings up to date and deal with tax debts quickly.

3. Prioritise payments with clear logic

There’s no single correct order for every business, but a sensible sequence often looks like:

1. HMRC – interest accrues daily and enforcement escalates quickly.
2. Secured lending – missed payments risk breaching covenants.
3. Energy and critical suppliers – protect operational continuity.
4. Other trade creditors and landlords – be transparent and consistent.
5. Director/shareholder loans – avoid repayments that strain cash.

Review this order monthly and record your reasoning.

4. Reduce late customer payments

Late payment remains one of the biggest sources of cash pressure. Tighten your internal discipline:

• Keep standard terms to 14–30 days.
• Issue accurate invoices promptly, with correct POs and accepted formats.
• Follow a simple chase rhythm: due date, +7 days, +14 days. Apply statutory interest where appropriate.
• Set credit limits for new or higher-risk accounts.
• Offer early-payment options or selective invoice finance where margins allow.

A calm, consistent approach usually delivers faster cash.

5. Strengthen cash in the short term

When pressure builds, work both sides of the cash equation.

Bring cash forward

• Focus on your top ten overdue balances over 60 days; call, agree a plan and diarise follow-ups.
• Consider invoice finance or factoring, checking fees, recourse rules and any debenture requirement.

Defer outflows sensibly

• Negotiate staged payments with key suppliers.
• Switch annual costs like insurance to monthly if the uplift is reasonable.
• Reduce stock to current demand and clear slow-moving lines.
• Cut non-essential subscriptions and standing orders.

6. Choose the right funding tool

Match borrowing to purpose:

• Overdrafts and revolving lines for seasonal swings.
• Term loans for defined investments.
• Asset-based lending for receivables, stock or plant.
• Government-backed options such as the Growth Guarantee Scheme (scheduled to run to April 2030).

7. Speak to lenders and HMRC early

Silence undermines confidence. If your forecast shows a risk of missed payments or covenant breaches, speak up early.

Lenders expect:

• Year-to-date performance summary
• 12-month cash forecast with base and downside cases
• Covenant look-ahead and mitigations
• A clear request with a realistic review date

With HMRC, call before any deadline passes. Have the numbers ready and propose a schedule you can keep.

8. Know when to seek formal restructuring advice

If debts cannot be met as they fall due, regulated advice protects both the business and its directors. Options include moratoriums, CVAs, restructuring plans and administration. Minutes, forecasts and timely decisions are essential.

9. Build the habits that make borrowing safer

The strongest businesses combine good forecasting with tight working-capital control:

• Regular pricing reviews
• Clear terms of trade
• Diversified suppliers
• Tighter stock management
• Trade credit insurance for concentrated risk
• Monthly cash and debt reviews with variances tracked

Frequent small adjustments usually beat large, infrequent ones.

If cash is tight, act today

Update your 12-week forecast, prioritise payments, speak to HMRC and lenders early, accelerate collections and freeze non-essential spend. Early action preserves options.

If you want support building control and headroom, get in touch.