Struggling to pay business debts – understand which are priority and which are non-priority

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If you are struggling to pay your debts, it helps to know which ones should take priority and which can be dealt with later. Ben Cowgill from Bolton Insolvency Experts explains further. Some creditors have more power than others to recover debt, and can do so without going to court. Ben outlines the main priority and non-priority business debts, to help you focus attention where it’s most required. Priority business debts

• Business rates have been very high in recent years. However, you can appeal against the ‘rateable value’ assigned to your premises. Reliefs are available for qualifying businesses, sometimes up to 100%.
• Keep up to date with your gas and electricity payments. If you fall behind on energy payments, your provider can cut off supplies to your premises quickly, but they must give you advanced notice. Energy suppliers are usually open to negotiations, and could offer you an extended payment plan.
• If you have arrears for water bills, it’s a good idea to pay your latest bill and then begin to tackle the arrears if possible.
• Business mortgage lenders and landlords have the right to take action without a court order. Business premises could be repossessed, or equipment and or stock removed, so it’s important to keep communications open with your lender or landlord.
• HMRC can take action without a court order, so if you are not able to meet a deadline, contact them. You are likely to be able to negotiate a Time to Pay arrangement for your HMRC liabilities.
• If you voluntarily return an asset and end the lease or hire purchase agreement, you’ll remain liable for up to half of the original amount. Once the item has been returned, the remaining debt then becomes non-priority.
• Should one of your suppliers be the only company who can provide certain items, you’ll probably want to regard them as a priority creditor in order to protect your own ability to trade.
• Bank loans secured on an asset should be treated as a priority debt. Unsecured loans are generally non-priority, unless you fear the bank will restrict your company accounts.
• Any form of borrowing with a personal guarantee is a priority debt. Your lender could call in the guarantee if loan repayments fall behind, and they see no realistic prospect of payment.

Non-priority business debts The consequences of failing to pay non-priority debts are less severe:

• Business credit cards and overdrafts generally fall into the category of unsecured loans, and are classed as non-priority.
• Non-essential business supplies could include office stationery, computer accessories, or accounts with suppliers of cleaning products, for example.
• Some bank and building society loans not secured on an asset or by personal guarantee are generally considered a non-priority debt.
• The credit agreement for charge cards such as American Express, differs from a standard credit card. You could find that the provider is not willing to negotiate with you for extended terms.

At Bolton Insolvency Experts, our main goal is to rescue your business but sometimes that is not possible. Our experienced team are available now on 0300 303 8284 or via our contact us page for honest and confidential advice.