Dealing With Corporate Debt

Corporate debt is an inescapable reality of the business world. Companies of all sizes rely on credit to launch, sustain and expand their corporate operations, to the extent that the levels and timely repayment of company debt is inextricably linked to the financial stability of the country.

During the financial crisis of recent years, many financial analysts and government figures expressed concerns over levels of business debt, and the direct exposure this places on the broader financial system.

While the debt levels of corporations undergo such unprecedented government and public scrutiny, companies must manage their debt and, more significantly, their debt repayments.
A company’s inability to pay business debts is often the first sign something is wrong. 

Dealing with debt problems

Regardless of the size of your company, realising your business has a corporate debt problem can be a difficult and stressful experience.

Although such difficulties arise from circumstances beyond your direct control — such as the broader economic situation or late payments by your debtors — company directors often feel directly responsible for the problem.

Taking action as soon as you realise the business has financial problems is important. While initial advice should certainly be taken from your accountant, also consult a corporate debt management or business recovery specialist.

The corporate debt market is surprisingly robust with many qualified insolvency practitioners that can advise on the options for resolving business debt problems. 

What solutions are available?

Debt solutions are tailored to the specific financial circumstances of each business.

If the debt problem is a short-term cash flow disruption, the resolution could lie with informally negotiating easier repayments for a while with your creditors. Most creditors would rather see your company recover to a stable and solvent trading status rather than go in to liquidation.

Corporate debt restructuring is viable in many cases. This may take the form of straightforward refinancing, like replacing a company credit card with a longer-term business loan at a more preferable interest rate, debt consolidation, taking secured lending, or even some form of equity arrangement.

For more serious corporate debt issues, a consultant will be also able to advise you about solutions such as administration, Company Voluntary Arrangements, or liquidation. 

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  Posted on 16 Feb 2012
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