There are several options available to help you pay your debts 

If your business is grappling with multiple debts, consolidating them is a potential strategy to regain financial stability. Various debt consolidation methods are at your disposal, contingent on your business type and circumstances. Regardless of the chosen approach, the objective remains consistent: merging all debts into a single monthly repayment to enhance cash flow and simplify debt management.


What is debt consolidation?

Debt consolidation involves merging multiple debts owed to different creditors into a larger, unified debt for more manageable repayment. While debt consolidation loans are a well-known method, there are alternative approaches like refinancing and a Company Voluntary Arrangement (CVA) that might be better suited to your situation.


What are the different ways to consolidate business debts?

I. Debt consolidation loan

If you find yourself owing money to numerous creditors, a debt consolidation loan allows you to amalgamate all those debts into a single repayment. The concept involves borrowing enough money to settle debts with various suppliers, lenders, landlords, utility companies, HMRC, and other creditors, consolidating your debts under one lender. 

Debt consolidation loans offer several advantages:

  • They alleviate the stress of creditor pressure and potential legal action due to late payments.
  • The administrative burden is significantly reduced, with only one monthly payment instead of several.
  • Monthly costs can be lowered, freeing up cash flow, either through an extended repayment term or a lower interest rate than your current liabilities.


Before proceeding with a debt consolidation loan, consider that extending the repayment schedule may result in higher overall repayments. Additionally, settling existing debts might incur early repayment penalties.

II. Debt refinancing

The primary distinction between debt refinancing and a debt consolidation loan lies in the approach to make one business debt more affordable. Rather than consolidating multiple debts into a single loan, debt refinancing involves taking out a loan with a lower interest rate or a longer repayment term than the existing debt to enhance monthly payment manageability.

Debt refinancing can be employed to:

  • Lower monthly repayments by switching to a loan with an extended term
  • Decrease repayments by switching to a loan with a lower interest rate
  • Borrow more money over a prolonged period to settle the original loan and generate additional cash for business investment


While refinancing offers increased flexibility and potential cash flow relief, it’s crucial to ensure the affordability of monthly repayments. If opting to reduce monthly repayments by extending the loan term, it may result in higher overall repayments. Lenders may also hesitate to lend to a financially struggling business.

III. Company Voluntary Arrangement 

If your limited company is unable to meet its debts, a Company Voluntary Arrangement (CVA) serves as a formal insolvency process, offering an extended timeframe for repayment. Unlike debt consolidation loans or refinancing, a CVA does not involve borrowing additional funds to replace existing debts. Instead, it establishes a repayment plan, typically spanning three to five years, consolidating all unsecured debts into a single monthly payment.

To initiate a CVA, you must create a proposal with the assistance of an insolvency practitioner. If creditors approve the proposal, interest and charges on the debts are frozen, and any legal actions cease. A notable aspect of a CVA is that a portion of the debts is often written off. Therefore, adhering to the repayment schedule means that, at the end of the CVA term, you will have paid only a percentage of the total owed.

While this may not appear favourable to creditors on the surface, they often support CVAs because they stand to receive a larger portion of the money owed compared to if the company undergoes liquidation.

The benefits of a CVA include:

  • Monthly repayments decrease as you settle a percentage of your total debt over an extended period
  • Interest charges are frozen, resulting in lower overall interest payments compared to a debt consolidation loan
  • As part of the CVA proposal, you might have the opportunity to renegotiate terms of contracts and lease agreements, reducing expenses and enhancing overall business profitability


A Company Voluntary Arrangement (CVA) can serve as a potent tool for businesses to gradually repay their debts. Nevertheless, it’s essential to be aware that a CVA will be recorded on your company’s credit file for six years. Additionally, it exclusively addresses unsecured debts, meaning a secured creditor like a bank might have the option to withdraw funding and pursue measures to recover the owed money.

Read More:

Are you struggling to repay business debts?

If your business is viable but experiencing mounting pressure from creditors, reach out to our team of experienced advisors at your earliest convenience. We can guide you through available options and assist in identifying the most effective way to consolidate your business’s debts. 

David Jackson MD
Senior Partner at Vanguard Insolvency Practitioners | Website

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.