Dealing With Debt: A Small Business Owner’s Guide To Recovery

Debt can feel like a heavy weight on your shoulders when you’re running a small business, especially when bills pile up faster than payments come in. But here’s the good news: you’re not alone, and there are clear, practical steps you can take to turn things around.

Whether you’re dealing with overdue invoices, business loans, or tax arrears, understanding how small businesses can manage and recover from business debt is key to keeping your business afloat and even stronger than before. In this blog, we’ll guide you through assessing your debt, understanding its origins, and taking the next steps to regain control.

Still, if you’re feeling stuck with debt, why not have a chat with Bells Accountants? We’re all about helping you take control of your finances in a stress-free way. Our friendly accountants for startups in Kent, Surrey & South East London are here to guide you through every step, so you can focus on growing your business.

Call us on 020 8850 0700 or email us at to discuss how we can support your business recovery.

How To Assess Business Debt

Before you can recover, you need to understand exactly where you stand. Here’s how to do that in a structured way:

1. List All Outstanding Debts

Create a comprehensive list of all outstanding debts owed by your business. Include:

• Credit cards
• Business loans
• HMRC tax bills (VAT, PAYE, Corporation Tax)
• Supplier invoices
• Utility arrears

So, be thorough — missed debts can cause legal problems down the line.

Also Read: Personal Tax Services

2. Record Terms, Interest, And Due Dates

Note repayment deadlines, interest rates, and any penalties. This will help you prioritise what needs urgent attention.

3. Work Out Your Monthly Debt Obligations

Add up the minimum monthly payments across all debts. Then compare that figure to your current monthly revenue.

4. Check Your Business Credit Report

You can access this from various credit score checker websites. This shows how creditors view your business and can help identify risks.

5. Evaluate Your Debt-To-Income Ratio

A healthy debt-to-income ratio (DTI) for small businesses is typically under 36%. If yours is above that, it’s time to rethink your approach.

Common Causes Of Debt For Small Business Owners

Understanding why debt happens is just as important as knowing how to fix it. Here are the most common causes of debt for small business owners:

1. Cash Flow Issues

According to the British Business Bank, 82% of small business failures are due to cash flow problems. Often, it’s not a lack of work — it’s late payments.

2. Overheads Growing Faster Than Revenue

If rent, payroll, or energy bills increase but sales stay flat, you’re headed for trouble.

3. Borrowing Without A Clear Repayment Plan

Many businesses turn to credit cards or short-term loans without budgeting for repayment.

4. Tax Mismanagement

Missing deadlines for VAT or Corporation Tax can quickly rack up penalties. To learn more, check out HMRC’s late payment penalties guidance.

5. Lack Of Budgeting And Forecasting

Without a forward-looking budget, even profitable businesses can overspend.

Need help with budgeting or forecasting? We’ve got templates and tools on our Resources Page to get you started.

Debt Management Strategies For Small Business Owners

Now that you know about how to assess your small business debt and what causes them, let’s focus on solutions. Below are some proven debt management strategies for small business owners you can put into action:

1. Prioritise High-Risk Debts First

Focus on debts that have legal consequences, like unpaid VAT or PAYE.

2. Create A Payment Plan

HMRC offers “Time to Pay” arrangements for businesses that are behind. This lets you spread payments over 6–12 months.

3. Consolidate Debts (Carefully)

If you’re juggling multiple repayments, consider a business debt consolidation loan. These combine everything into one payment, often at a lower interest rate.

4. Negotiate With Creditors

Don’t be afraid to ask for reduced payments, extended terms, or interest holidays. Lenders often prefer partial payments over none.

5. Improve Cash Flow Management

Review your invoicing systems — could you shorten your payment terms or offer early payment discounts? Our cash flow management tips are a good place to start.

6. Speak To An Expert

Don’t go it alone. An accountant can help you set realistic goals, reduce interest, and navigate tough conversations with creditors.

This is where Bells Accountants can help. Contact us to get financial recovery services designed specifically for UK entrepreneurs.

How To Prioritise Business Debts Strategically

Not all debts are created equal. Here’s how to create a smart plan of attack:

1. Legal And Tax Debts Come First

Debts to HMRC should be your top priority. Failing to address these can result in enforcement action or court judgments.

2. Then Pay Secured Debts

Loans tied to assets (like vehicles or property) risk repossession if unpaid.

3. Next, Look At High-Interest Credit

Credit cards and overdrafts cost more the longer you leave them.

4. Maintain Essential Supplier Relationships

If you rely on certain suppliers to operate, maintain healthy relationships by making partial or regular payments.

5. Cut Or Pause Non-Essential Expenses

Subscriptions, advertising, or unused services can often be trimmed during a crisis.

6. Track Everything Weekly

Weekly check-ins help catch problems before they snowball.

If this feels overwhelming, don’t worry. We can refer you to trusted partners who can evaluate your situation and help you determine the best path forward.

What If Someone Owes You Money?

Debt recovery for small businesses works both ways. If unpaid invoices are the root of your cash flow issues, it may be time to take action through small business debt recovery processes:

1. Send Professional Reminders

Often, a firm yet friendly reminder is effective. Use accounting software like Xero with automatic reminders if possible.

2. Add Late Payment Interest

Under the Late Payment of Commercial Debts Act, you’re legally allowed to charge interest and recovery fees.

Click here to learn more about your rights as a creditor.

3. Use A Debt Recovery Service

If payments still don’t come through, we can refer you to trusted collection partners or work with you to issue legal proceedings — always the last resort, but sometimes necessary.

Need Help With Debt Recovery? You’re Not Alone — Connect With Bells Accountants Today!

Debt doesn’t mean failure. It just means your small business needs a new approach to debt recovery— and that’s what we’re here for.

At Bells Accountants, we help small business owners:

• Regain control of their finances
• Create smart, realistic repayment plans
• Simplify your books with managing business finances support
• Get back to growth, with no scary jargon

Call us today on 020 8850 0700 or email us at , and let’s have a friendly, no-pressure chat about where you’re at and how we can help.