How to cope with debt

Illustration of a bomb with the word debt chained to a boot

With the boom in UK entrepreneurship comes the inevitable issue of debt associated with business risk. Joanna Elson, chief executive of the Money Advice Trust, offers tips for owners of small firms on coping with creditors

In recent years, more and more individuals have seized the opportunity to set up their own company. This marks a notable shift in employment dynamics and one that looks set to continue in the future. With nearly five million people working for themselves, the UK is already the capital of self-employment in western Europe.

Through our Business Debtline service, the Money Advice Trust has – since 1992 – built up expertise in helping companies get back on track if they run into financial difficulty. As the only dedicated advice service of its kind, Business Debtline is uniquely placed in the UK context to help these businesses to resolve their financial problems and get on with the task of focusing on their growth and development. The right advice at the right time can be critical in determining whether a business will continue to trade or not.

Last year, we used our experience in this field to publish our The Cost of Doing Business report, which offers an insight into the realities of running a business, emerging trends that our advisers are witnessing and a series of practical recommendations for regulators and government about how the environment in which SMEs operate can be improved.

In the coming years, we are looking to strengthen and expand Business Debtline as we anticipate that the need for this type of advice will continue to grow. In order to meet this demand, we have recently established a Business Debtline Funders’ Forum, chaired by Money Advice Trust ambassador and entrepreneur Liz Barclay, to showcase the work we do and to help develop our partnerships with new organisations that can help us to achieve this goal.

The fear of failure often prevents would-be entrepreneurs from pursuing their business ideas, but high-quality, free financial advice helps to build an enterprise culture that encourages individuals to make a go of their ideas and take a risk, in the knowledge that there is support available to them should they ever need it.

Coping with debt

Here’s our best advice for entrepreneurs and SMEs on coping with debt…

1. Resist the urge to borrow your way out

It can be tempting to consider using personal credit to deal with business debts. While it might seem like an obvious quick-fix, do think carefully before mixing the two as in the long term this can lead to greater financial difficulties – both on a business and personal level.

2. Consider cashflow

Even at the best of times it is crucial to have a good understanding of your cashflow – and this is even more important if you are trying to get to grips with business debts. Tools such as the Start Up Loans Cash Flow Forecast can be useful in helping you to manage this aspect of your business, enabling you to plan how you will be able to resolve any outstanding debts.

3. Deal with your priority debts first

Not all debts are equal. If you have arrears on personal or business priority debts such as a mortgage, rent or utilities, council tax or business rates, it is crucial that you resolve these first of all so that your business can continue trading. While credit debts such as loans and credit cards will also need to be addressed, they are less urgent. Getting free debt advice can help you to find a way to deal with both types of debt.

4. Don’t fall foul of HMRC

When you’re trying to tackle debts and work on building your business, it can be easy to overlook other crucial deadlines, such as those for self-assessment tax returns. The penalties that missed deadlines incur will only add to your pressures and can otherwise be avoided so make sure that you take these into account in your planning.

5. Keep one eye on the longer term

The importance of being financially resilient can’t be underestimated, but this is often easier said than done. The first step to getting there is planning on how to resolve your debts so that you reach a stage where you can turn to building up reserves for the future. It’s worth considering all your savings options, such as the newly introduced Lifetime ISA, which can also be used to prepare for retirement.

6. Seek free advice

Facing your business debts and your creditors can seem like an overwhelming prospect but it can’t be stressed enough that the earlier you take stock of your situation, the easier any debts will be to resolve overall. If you are already struggling financially, or are worried that you might soon be, the best thing you can do is to contact Business Debtline – the UK’s only free, dedicated business debt advice service.

Any business owner can seek free and independent advice from trained experts at Business Debtline via or by calling 0800 197 6026

To download The Cost of Doing Business, visit

Joanna Elson CV

Portrait of Joanna Elson of Money Advice Trust who discusses debtRoles Chief executive of the Money Advice Trust since 2006. Also a member of the advisory panel of the Financial Inclusion Commission, the ABCUL/Lloyds Banking Group Grants Committee, the Treasury’s Home Finance Forum, the Chartered Banker Professional Standards Board advisory panel, the British Bankers’ Association’s (BBA) consumer panel, and the advisory panel at Birmingham University’s Centre on Household Assets and Savings Management. Elson is also chair of the BBA’s Financial Services Vulnerability Taskforce.

2010 Awarded the OBE for services to people in debt

1997-2006 Executive director, British Bankers’ Association

1990-1997 Researcher, House of Commons, speechwriter for Labour MPs Barbara Roche and Joan Lestor

Joanna Elson is a chartered director and member of IoD Central London


About author

Joanna Elson

Joanna Elson

Joanna Elson is chief executive of the Money Advice Trust.

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