Making sure a small debt problem doesn’t become an unmanageable problem

By Mr Bankruptcy

30th January 2025

Fans of Ernest Hemingway might be familiar with the following from his 1926 novel, The Sun Also Rises:

“How did you go bankrupt?” Bill asked.

“Two ways,” Mike said. “Gradually and then suddenly.”

Some things never change, and it’s just as true for businesses and even nations as it is for individuals. A small trickle of events and gradual changes suddenly turns into a torrent.

We all have debt; it’s an important enabler in modern life, and it’s fine while you can manage it. But spotting the signs before you start accelerating to that tipping point when ‘good’ debt flips into bad debt can save you from a financial and mental health crisis which can affect not only you but those around you.

Spotting the early signs of a debt problem

The warning signs are always there, even in the early stages. The important thing is to have the right information in front of you, not to ignore it when you see it and acknowledge the writing on the wall when you see it.

Some of those early warnings that your debt is becoming a problem include, but aren’t limited to:

What can I do about worsening debt?

The first thing is to notice and acknowledge the problem and to decide to tackle it. If you’ve already done this then you’ve probably taken the hardest step. Whether it’s personal or business debt, you can then take some initial actions yourself to start dealing with the problem.

Business owners need to get back to familiar and basic good practices and look at reviewing budgets, cutting costs and ways of increasing income.

Individuals should do something similar at the personal level, sitting down, being honest with themselves and writing out a list of income and outgoings to see where changes can be made to bring the bottom line into a better balance.

Creditors can be approached to explore ways of making repayments more manageable. They usually recognise it’s in their interests for you to continue repaying what you owe them.

It may get to the stage that you need professional advice. A debt advisor will be able to look at your circumstances, prioritise debts and identify options you may not have been aware of.

Also, if formal, legal action becomes necessary, a debt advisor can help you to negotiate with creditors and deal with courts and official receivers, which can be stressful if you aren’t familiar with the processes.

Throughout all of this, it’s important to tell your nearest and dearest, whether they are business partners or friends and family. Your problem may be caused by bad decisions or habits or an unexpected setback such as losing your job or an unexpected tax demand but they could also be affected by your debt. However, they can also offer both practical and emotional support and will appreciate your honesty with them.

Looking forward

Everyone is likely to experience debt of some kind, whether it’s a standing overdraft, a mortgage to buy your home or a student loan.

Debt isn’t necessarily a bad thing if you’re able to manage it, but it can quickly get out of hand and become a full-blown crisis. I’ve seen it happen in many clients and even experienced it myself.

By identifying the warning signs early on, it’s easier to get on top of debt before it becomes a problem. Even when there seems to be no clear way forward, there’s always support available to help you understand and deal with your options confidently.

James Rosa Associates

James Rosa associates is a firm of debt advisors and debt adjustors. With a supportive, non-judgemental and friendly approach, we offer a full range of advice and professional services to individuals and business owners and directors facing problem debt and are actively seeking a solution. We also help clients involved in a civil or commercial dispute.

Our range of services include:

As you would expect, we are fully authorised and regulated by the Financial Conduct Authority (FRN665061) to work with clients and are qualified to produce bespoke solutions to suit their unique and personal circumstances.

Do you qualify for a free consultation?

If you need to deal with an unmanageable debt, or bring a dispute to a swift and cost-effective resolution, then contact James Rosa Associates, ring 0845 6807217 or email enquiries@jamesrosa.co.uk today for a discussion to find out whether you qualify for our free consultation service.

How to deal with problem debt as a small business owner

By Mr Bankruptcy

16th January 2025

You had a great idea for meeting a need or solving a problem, you spotted a niche in the market and you decided to take the plunge and set up a small business or become self-employed.

You turned your idea into reality, but instead of enjoying the rewards for satisfying customers, employing local people and adding to the economy you’re facing what looks like an insurmountable debt problem. It’s giving you sleepless nights and putting your relationship with friends and family under stress, especially if you’ve made a personal guarantee for a business loan. What can you do about it?

Tough times for business

Firstly, it’s important to realise that you aren’t alone. Last year, Business Matters magazine reported on a survey of over 600 UK small and medium-sized Enterprises (SMEs) which found that 44% of respondents had come close to shutting down in 2024.

You may have done the sums and taken on a sustainable business loan to get started, but like many other businesses today, you are facing many additional challenges to your cashflow, and ability to keep up with repayments:

On top of all this, from April businesses face increases in their payroll bill. Employer National Insurance contributions rise from 13.8 to 15% and the salary threshold drops from £9,100 to £5,000. The Chancellor also announced a 6.7% increase in the minimum wage, all adding to pressure on SMEs.

What can you do?

If you are struggling to make debt repayments, it’s important firstly to face up to the reality of the situation and take initial actions. You may think you run a lean operation, but are there other areas where you can either increase your income or cut business costs? It often comes back to basic business practices: reviewing budgets, cutting costs and exploring alternatives, such as available relief schemes.

It’s also helpful to talk to others about a debt problem. Not only can it reduce stress and offer emotional support, but your team – partners, managers, staff, your bookkeeper or accountant – may also have fresh ideas for increasing income or reducing operating costs.

Maybe you have a business mentor, or a support group such as a local business association or networking group, that you can talk to. They will have a wealth of experience and advice because plenty of successful businesspeople have been in your shoes at some point.

It’s also important to keep lines of communication open with creditors. If you explain your situation and show willingness to look for solutions, you may find them more flexible and willing to help than you think, rearranging debt repayments or extending the loan term, rather than taking more formal debt recovery action.

A worst-case scenario

It may turn out that even after you’ve done all you can and you’ve prioritised your debt repayments, you’ve run out of options and your debt is becoming unmanageable. In that case it’s important to talk to a professional debt advisor who can look at other options, including bankruptcy.

In one case I dealt with, I was referred to a client who ran a bathroom supply and fitting business with his son. He faced 51 separate debts, mainly with trade suppliers, totalling more than £424,000.

Our client had planned to sell his home to negotiate full and final settlements with his creditors but one of them issued a Statutory Demand for repayment.

We worked with all his creditors to reach an amicable conclusion, but problems arose with the house sale and a negotiated settlement was no longer possible, so the creditor petitioned for our client’s bankruptcy.

We prepared a Statement of Affairs and accompanied the client at his interview with the Insolvency Service, remaining in support and dealing with their queries until he was discharged. Ultimately, we were able to write off his entire debt.

So, even when it looks as if there’s no way ahead, support is always available from many different sources – professional advisors, charities, colleagues and your family. They can help you to understand all the options open to you and your business, or simply give you the confidence to take the next step.

James Rosa Associates

James Rosa associates is a firm of debt advisors and debt adjustors. Known for our supportive, non-judgemental and friendly approach, we offer a full range of advice and professional services to business owner/directors as well as individuals facing unmanageable debt and seek a solution, or involved in civil or commercial disputes. Our services include:

We are, of course, authorised and regulated by the Financial Conduct Authority (FRN665061) to work with clients, producing bespoke solutions for individual circumstances.

Find out if you qualify for a free consultation

If you need to deal with an unmanageable debt or bring a dispute to a swift and less costly resolution, contact James Rosa Associates by ringing 0845 6807217 or emailing enquiries@jamesrosa.co.uk. You may qualify for one of our limited number of free consultations.

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