Most UK businesses need some form of credit to start up or grow. Used carefully, business loans, lines of credit and business credit cards can help you pay staff, buy equipment, invest in marketing and smooth out seasonal cash flow. When repayments outstrip income, you need a clear plan to get your business out of debt.

According to the Insolvency Service, company insolvencies in England and Wales reached 25,577 in 2024, the highest annual level since 2009, with small and micro-businesses disproportionately represented. In 2026, trading conditions remain pressured by higher borrowing costs, persistent late payment culture and rising employment costs. If you are a woman running a business in the UK, understanding your options early can mean the difference between restructuring and losing the company you have built.

Warning signs that debt is becoming a problem include regularly missing payment dates, using new borrowing to pay old debts, maxing out credit cards, receiving final demands or statutory demands, and being unable to pay tax bills when they fall due. If any of these sound familiar, it is important to act quickly. Creditors may issue statutory demands, apply for county court judgments (CCJs) or begin winding-up proceedings. Acting early gives you more options and reduces the risk of losing your business.

Below are practical steps to take, from drawing up a debt management plan and cutting costs to refinancing, consolidation and formal insolvency solutions.

How to get your business out of debt

You can reduce business debt by improving cash flow, reducing outgoings and renegotiating the terms of what you owe. Start with a clear picture of every debt, then prioritise repayments, increase revenue and cut unnecessary costs. If the debt is still unmanageable, consider refinancing, consolidation or a formal arrangement such as an Individual Voluntary Arrangement (IVA), Company Voluntary Arrangement (CVA) or HMRC Time to Pay deal.

Take five steps to reduce business debt

Many small firms are carrying higher debt levels following recent cost-of-living, energy price and interest rate pressures. If your debts are still manageable, start with these practical steps before considering more formal arrangements.

Make your own debt management plan

Many companies offer debt management plans, but creating your own is free and keeps you in control. List every business debt, including loans, credit cards, supplier invoices, tax debts and asset finance, along with the outstanding balance, interest rate and minimum monthly payment.

Two popular repayment strategies are:

• Avalanche method. Pay the minimum on everything, then put any extra cash towards the debt with the highest interest rate. This reduces the total interest you pay.
• Snowball method. Pay the minimum on everything, then clear the smallest balance first. The quick win can keep you motivated.

Choose the approach that best suits your business psychology and cash flow. The key is to stop taking on new debt while you work through the list. If you are struggling to meet a particular payment, contact the creditor before you miss it. Many lenders and suppliers will agree to a revised payment plan if you are transparent and realistic about what you can afford.

Create a realistic budget

A clear budget is essential. Review the last three to six months of bank and credit card statements to see exactly where money is going. Look for subscriptions, software licences, travel costs or supplier contracts that have crept up.

Separate essential spending from discretionary spending. Build a simple cash-flow forecast that projects income and outgoings for at least the next 12 weeks. This helps you spot pinch points before they become crises. If your income comes from several clients or sales channels, accounting software such as FreeAgent, Xero or QuickBooks can help you track incomings and outgoings in real time. Many offer low-cost plans for small businesses.

Be cautious about borrowing more to pay off existing debt. A short-term cash advance or high-cost loan can quickly become a debt trap. Only refinance if the new terms are genuinely cheaper and affordable over the full term. For more on choosing business finance, see our guide on what UK directors must consider when choosing business loans.

Boost sales and increase revenue

Increasing turnover is one of the most effective ways to pay down debt faster. Consider:

• Launch a customer loyalty programme. Repeat customers typically spend more over time and cost less to serve than new ones. A simple points scheme or members-only discount can lift average order value.
• Improve your social media presence. Choose one or two platforms where your customers are active, respond promptly to messages and share useful content rather than constant sales posts. Trust often converts into sales.
• Run limited-time offers. Time-limited discounts or bundles can shift slow stock and bring cash in quickly. Make sure the margin still leaves room for debt repayments.
• Upsell and cross-sell. Train staff or update your website to suggest complementary products or premium versions at the point of sale.
• Reactivate lapsed customers. A targeted email or special offer to previous buyers can be cheaper than finding new ones.
• Introduce retainers or subscriptions. Recurring revenue makes cash flow more predictable and can reduce the stress of chasing one-off payments.

Cut costs and free up cash

Trimming overheads frees up cash for debt repayments. Options include:

• Selling unused equipment, vehicles or stock and buying second-hand replacements only when essential.
• Renegotiating rent, utilities, insurance and supplier contracts. Energy brokers, business comparison sites and direct negotiation can all reduce bills.
• Downsizing your premises or moving to a home-based or hybrid model if your business allows.
• Reviewing staffing costs. If redundancies are unavoidable, follow UK employment law and seek advice before acting.
• Reducing waste and going paperless. Small savings on printing, postage and energy add up over a year.
• Sharing resources with other local businesses, such as bulk-buying stock or splitting marketing costs.

Shorten payment terms with clients

If cash is tied up in unpaid invoices, tighten your credit control. Issue invoices promptly, ask new clients for a deposit or payment on shorter terms, and chase late payments consistently. You can also charge statutory interest on overdue commercial debts under the Late Payment of Commercial Debts (Interest) Act 1998. As of 2026, the statutory interest rate is 8% above the Bank of England base rate.

If late payments are a persistent problem, consider invoice factoring or invoice discounting. These arrangements let you borrow against the value of your unpaid invoices, although fees apply and you may lose some control over customer relationships.

Explore formal debt solutions

Consider business debt refinancing

Refinancing means replacing an existing loan with a new one that has better terms, usually a lower interest rate or longer repayment period. This can reduce monthly outgoings and improve cash flow, but it does not erase the debt.

Before refinancing, compare the total cost of borrowing over the full term, including arrangement fees and early repayment charges. A lower monthly payment can mask a higher overall cost. Check whether the new loan is secured against business or personal assets, and whether you will be asked to give a personal guarantee. Lenders will also review your business credit history, so refinancing is usually easier if your business is fundamentally profitable.

The Bank of England base rate stood at 5.25% through much of 2024, according to Bank of England data, and has come down since, but borrowing costs in 2026 remain higher than the ultra-low rates seen earlier in the decade. This means refinancing only makes sense if your existing debt is at a particularly high rate or if you need to extend the term to manage cash flow.

Look at debt consolidation

Consolidation works like refinancing, but it rolls several debts into one. Instead of juggling multiple monthly payments, you make a single repayment, ideally at a lower overall interest rate.

For sole traders, a personal loan or a 0% balance transfer credit card may be an option for unsecured debts. Limited companies may find dedicated business consolidation loans, although 0% business balance transfer cards are rare. Always check whether the new deal is secured against business or personal assets, what fees apply and what happens if you miss payments. Consolidation can simplify your finances, but if it extends the repayment term you may pay more in total interest.

Think about debt for equity

If your business is a limited company with valuable stock or assets, you may be able to raise capital by selling shares to investors rather than borrowing. This avoids monthly repayments, but it dilutes existing shareholders and can reduce your control. It is usually only suitable for companies with growth potential and a clear plan for how the investment will be used. For women founders exploring funding options, our guide to the British Business Bank’s new funding rules for women founders explains current programmes.

Understand Individual Voluntary Arrangements

An IVA is a formal agreement between you and your creditors, supervised by an insolvency practitioner. It is available to individuals in England, Wales and Northern Ireland; Scotland uses a similar process called a Protected Trust Deed.

For sole traders, an IVA can include both personal and business-related unsecured debts, including debts to HMRC. You make affordable monthly payments for around five to six years, interest is frozen, and any remaining qualifying debt is written off at the end. This lets you keep trading rather than filing for bankruptcy, which could force you to sell business assets.

If you are the director of a limited company, an IVA deals with your personal debts only; the company’s finances are separate. Because bankruptcy would prevent you from acting as a company director, an IVA can protect your position while you trade your way out of difficulty.

Pros of an IVA

• Lets you continue trading.
• Protects essential business assets and, in many cases, your home.
• Freezes interest and charges on included debts.
• Writes off remaining qualifying debt at the end of the term.
• Gives you a single, affordable monthly payment.

Cons of an IVA

• Will damage your credit rating for six years from the start date.
• You may have to pay more if your income increases.
• Failure to keep up payments can lead to bankruptcy.
• Setup and supervision fees apply.
• Not all debts can be included; secured debts such as mortgages are excluded.

Understand Company Voluntary Arrangements

If your limited company itself is insolvent but viable, a CVA may be an option. Like an IVA, it is a formal agreement with creditors to repay part of the debt over time while the company continues to trade. A licensed insolvency practitioner must administer it, and the terms must be approved by creditors representing at least 75% of the debt value.

A CVA can stop legal action by creditors and give the business breathing space to restructure. However, it requires creditor support, ongoing supervision and disciplined cash-flow management. If the company fails to keep to the agreed payments, the CVA may fail and liquidation could follow.

Apply for a Time to Pay arrangement

If you owe tax to HMRC, do not ignore their letters. A Time to Pay arrangement lets you spread corporation tax, VAT, PAYE or self-assessment liabilities over an agreed period, usually up to 12 months, though longer terms may be possible in exceptional cases.

You will need to show HMRC that you can afford the instalments and keep up with future tax bills. Interest may apply on some taxes. Contact HMRC’s Payment Support Service as soon as you foresee a problem. If your company is already insolvent or the tax debt is part of a wider problem, speak to a licensed insolvency practitioner as well. For sole traders, our self-employed tax UK guide for 2026/27 sets out current payment deadlines and allowances.

Find current UK business support

Several sources of help remain for businesses struggling with debt in 2026.

• HMRC Time to Pay. As above, this is often the first port of call for tax debts.
• Business Debtline. A free, independent debt advice service for self-employed people and small business owners in England, Wales and Scotland. In Northern Ireland, Advice NI offers similar support.
• MoneyHelper. Government-backed guidance on debt, budgeting and business finance.
• Licensed insolvency practitioners. If your business is insolvent or likely to become insolvent, speak to a licensed insolvency practitioner about options such as administration, liquidation or a CVA. You can find one through the Insolvency Service or recognised professional bodies.
• Your bank or finance broker. If you need to refinance, your existing lender or an independent broker may be able to find a more suitable product.

If you are considering refinancing, the British Business Bank’s Growth Guarantee Scheme supports SMEs that struggle to access traditional bank finance. It is not a debt-relief scheme, but it may help viable businesses replace expensive borrowing with more affordable finance. The scheme runs until 31 March 2026 and is delivered through accredited lenders. For women-led businesses specifically, the British Business Bank continues to track and address funding gaps highlighted in the Alison Rose Review of Female Entrepreneurship.

For context on the wider environment for women-led firms, see Women in Business: Key UK Facts.

Follow these action steps

1. List every business debt with balances, interest rates and minimum payments.
2. Build a 12-week cash-flow forecast to identify pinch points.
3. Contact creditors before you miss payments to negotiate revised terms.
4. Cut non-essential costs and tighten credit control to free up cash.
5. If tax is the problem, call HMRC’s Payment Support Service about a Time to Pay arrangement.
6. If debts are unmanageable, speak to a licensed insolvency practitioner or Business Debtline.

Business debt is common, but it does not have to be permanent. Start by understanding exactly what you owe, build a realistic budget, and take steps to increase revenue and cut costs. If those measures are not enough, explore refinancing, consolidation or a formal arrangement such as an IVA, CVA or Time to Pay deal to get your business out of debt.

The most important step is to act early. The sooner you face the figures and seek advice, the more options you will have to protect your business and get back on solid financial ground.