What is business debt consolidation?


Business debt consolidation is an effective way to restructure existing, expensive forms of business debt from lenders, corporate credit cards, creditors, suppliers or collection agencies. The main benefit of business debt consolidation is that it allows the borrower to improve the liquidity (cash flow) of their business, although it can also reduce administration costs, especially if the business has multiple creditors to service each month.

As with any form of debt consolidation, you must first be sure that the revised payments enable you to meet the day to day cost of operating your business and that you’re comfortable with the length of the new arrangement. If not, then you are simply staving off the inevitable.

Generally speaking, as businesses exist for the sole purpose of creating profit and as smaller companies are often heavily geared with few company owned assets, if your revenue is not sufficient to cover your cost of operating or if your projected growth is unrealistic or unsustainable, lenders will be reluctant to risk lending you their money anyway. In these circumstances, you may be better off considering a Corporate Voluntary Arrangement or an Individual Voluntary Arrangement (which is right for you depends on the legal structure of your business – see What is a business IVA?), as apposed to business debt consolidation.

You can read more about this solution and whether it is suitable for your situation in our Debt Consolidation section.

Debt Advice Foundation is a registered UK charity offering free, confidential support and advice on any aspect of debt, including Debt Consolidation. If you need to talk to someone about Debt Consolidation or would like to discuss the alternatives, please call 0800 043 40 50 to speak to an adviser.