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Published on:November 3, 2021Author:Liam Wright


Beverley Budsworth – MD of The Business Debt Advisor 


September 21 was the last month of furlough assistance which has been literally been a business life saver during Covid. BBL’s and the ability to ask for top ups closed in March 2021.  Without the Covid financial safety nets, businesses will have to make some very tough decisions as it likely that the return to “normal” trading will take some time and for some sectors may not returns.

According to a survey by The Federation of Small Businesses “FSB” undertaken earlier in the year, around 250,000 businesses at risk of closure as a result of the pandemic. In the quarter to June 21, there was a 20% in the numbers of companies liquidated voluntarily “CVL’s”  – 2,819 compared to 2,087 in the quarter to March 21. During the height of the 2008/09 credit crunch, CVL numbers were around 3,500 per quarter.


Survival of the fittest is a term made famous in the fifth edition (published in 1869) of On the Origin of Species by British naturalist Charles Darwin, which suggested that organisms best adjusted to their environment are the most successful in surviving.

We may well be about to witness an extreme case of the survival of the fittest in the SME space. There is a very real danger that significant numbers of businesses that will be unable to plug the hole without the Coronavirus safety net provided by the government and unless the adapt very quickly to the new normal, they will fail.


The companies that will survive will be those that have leaders with courage to make difficult decisions.  Covid did force companies to review their operations and with the benefit of furlough, CBILS and BBL loans it was possible to cut back on costs and get access to finance to fund ongoing trading.

Survival plans going forward will have required a complete overhaul of strategy and plans that targets resources to growth pockets.

A survey by McKinsey Global Institute of 860 executives found that companies in the top 25% for growth invested 2.6 times as much as those in the bottom 25% in “intangibles”. These include research, technology, software, advertising, branding and human capital.

Watching your business decline is extraordinarily stressful.  Stress can be utterly debilitating and it often associated with inertia or hibernation – avoiding making those very painful decisions whilst the business declines on a daily basis. These decisions are made much more difficult when directors are facing personal financial hardship if the business fails i.e personal guarantees or personal funds wrapped up in the business.


It is proven fact that talking through problems makes it so much more likely to find a solution. For example, The government has a Pay as you Grow Scheme. This was originally announced by the Chancellor of the Exchequer in September 2020, Pay As You Grow (PAYG) will enable businesses who have started repaying their Bounce Back Loans to:

  • Request an extension of their loan term from 5 to 10 years at the same fixed interest rate of 2.5%
  • Reduce their monthly payments for 6 months by paying interest only. This is available up to 3 times during the term of the BBL
  • Take a repayment holiday of up to 6 months. This is available only once during the term of the BBL.

Borrowers can use these options individually or in combination with each other.


It is so much easier to make decisions when you have weighed up all the options. These options can only be properly investigated if you know what’s coming in and going out – a cash flow forecast which in the first instance excludes historic debt payments. This will identify what sort of surplus is available to cover your company’s debt payments. If there is a business that is worth saving but debt payments are crippling including the costs of redundancies, A Company Voluntary Arrangement “CVA” may be appropriate. A CVA can allow the business to carry on trading, freeze historic debt, get help from The Redundancy Fund to cover claims of employees that need to be made redundant. The frozen debt is then repaid by way of monthly contributions which get paid into the CVA pot from which distributions are made to creditors.

All of the potential options will have risks and benefits. It’s vital to speak to someone you can trust and who also knows what they are talking about. The Business Debt Advisor team have been advising directors for 22 years. There are very few problems we have not encountered. Doing the Right Thing is in our DNA.

This includes also advising directors of the implications of any solutions on themselves. Winding up a business can have significant personal implications for directors not only in relation to personal guarantees but also if government assistance has been abused. Using a BBL to repay your directors loan account could mean you face action to disqualify you from being a director. The Liquidator will also need to investigate whether this amounts to Misfeance S212 Insolvency Act which means you have misused company assets/money or Preference S239 meaning you have paid off certain debts in priority to others.

There is no sense agreeing to wind up your company vital for your clients and this starts with ensuring that they get “whole of market” advice on the options available to them.

The Debt Advisor Ltd which incorporates The Business Debt Advisor is authorised and regulated by The Financial Conduct Authority, number 659920. Beverley Budsworth, the MD and IP is licensed and regulated by The Insolvency Practitioners Association.