Debt management: the penny drops

By Jo Bruce

- Last updated on GMT

Helping hand: When you are in debt it is important to have someone to offer you help
Helping hand: When you are in debt it is important to have someone to offer you help
Financial problems are common across the entire sector so it’s no surprise many publicans are feeling the pinch. Here is some advice on coping with debt and finding a way out of it.

Help at hand

If you are enduring financial worries, there are charities and advisors out there; you just need to make contact with them. Here is a list of potential helpers:

Licensed Trade Charity​ -​ 

0808 801 0550 - 24/7 helpline

StepChange Debt charity​ – personal debt support –

Money Advice Trust’s Business Debt Line​ –
0800 1976026 or

Taxaid​ – free advice to people who cannot afford to pay a professional adviser​.

Help negotiating rent reviews​ – The Royal Institute for Chartered Surveyors (RICS) –​ 

Accountancy solutions​ – EKW Group –

Christie Finance​ –

Bridgewood Debt Solutions​ –

Morgan Richardson (insurance)​ –

With the Bank of England predicting interest rates are more likely than not to increase by the end of 2018 and with Brexit on the horizon, the time is right for pub operators to get debts in order and review costs.

As Stuart Pawelczyk, director at Christie Finance, says: “The market is performing OK at present, but the approach of banks and lenders is changing all the time. Now is a vital time for operators to review what they have got, including wage bills and utilities but also financing costs, with the potential financial headwinds coming forward in the near future.”

Although it is certainly prudent for operators to review any existing debts they may have and look for better rates and deals, the market is still buoyant for those seeking new finance according to Pawelczyk, with a range of lenders offering funding for quality pub operator looking to take on new sites or expand their current businesses.

He says: “But now more than ever it is important to have an expert in your corner who knows which banks and lenders to go to in the market and has knowledge and established relationships with them. Some banks aren’t lending but operators shouldn’t lose hope because there are always options available.”

Before licensees apply for a loan or mortgage, however, they should ensure they have up-to-date financial records and accounts and a clear plan of what they need.

As Paul Thompson, principal of Acorn Finance, a broker specialising in SME funding for the licensed trade, says: “Airlines are great at making every possible square inch of an aircraft profitable and are constantly looking at ways of improving this without diminishing their customer experience, is this something you can do to arrange the lowest cost extension possible?”

He adds: “Don’t apply for a loan or mortgage without knowing exactly what you need. While in many cases, someone with my experience might be able to give you options of what is available in the marketplace, if you only approach your own bank (like 60% of other UK business owners do), they may turn you down because they don’t understand what you need.”

Dealing with debt

With ever-increasing costs and unpredictable trading conditions, such as the ‘Beast from the East’ cold weather snap, it can be hard for licensees to prevent debts building up and spiralling.

According to the Licensed Trade Charity, debt is still the biggest issue publicans contact them about, with the charity last year seeing a 14% increase in people needing debt relief support.

The charity says business rates, rent and tax are generally the biggest types of debt that the licensees they help face.

Robin Tarling, managing director of Bridgewood Debt Solutions, which assists about 300 licensees a year with debt issues, says, in his experience, the HMRC is generally always the biggest creditor. 

He says: “The HMRC is often perceived initially as less proactive in chasing debts, and licensees who are spinning plates with debts will pay the people who are chasing them on the phone. But you should treat all creditors equally and, ultimately, it is the HMRC who are more likely to distrain on assets (seize good or property) or petition for bankruptcy.” 

Other frequent creditors for publicans are utility companies, Sky/BT Sports and PRS/PPL (which look after music licensing) and many licensees often have personal as well as business debts to tackle.

To help put the brakes on debt, Alex Clarke, year end and tax adviser at accountants and business advisers EKW Group, recommends: “The key to prevention of debt is having up-to-date financial information – if you have this, then you can quickly make changes to your business model. The majority of the time, financial difficulty arises in the annual accounts. At that stage, it can be too late to make the necessary changes to address the problems that have taken place.”

Credit where it is due

Here is advice from the Money Advice Trust on dealing with debt:

Rent arrears: 

If you fall behind with your rent, contact your landlord immediately. Larger pub companies have credit control departments. They should work with you to help you clear the arrears as quickly as possible. Complete a budget and give them full information about your financial circumstances. This will help them to make a fair decision about how much time you need to pay what you owe.

Remember, it is often in your landlord’s interests to keep you in your pub so that the rent is being paid. 

Debts to HMRC:

HMRC takes late payments very seriously. If you have an accountant, it is still your responsibility to make sure your tax returns are sent to HMRC on time. For temporary financial difficulty, HMRC’s Business Payment Support Service may be willing to enter into a short-term payment arrangement with you. Call 0300 200 3835 for details.


Gas, electricity and water bills are priority debts – if you don’t pay them, your business supply can be disconnected. Their credit control departments should try to help you to negotiate a payment plan for your arrears. 

Communication is key

If your debts are beginning to mount up, the Licensed Trade Charity’s marketing and charity services director Liz Gaffer advises tackling the situation quickly. She says: “The earlier people recognise there is a problem, the easier it is to resolve.”

Bridgewood’s Tarling advises speaking to the creditors concerned before the situation gets out of hand. He says: “The worst thing you can do is not communicate because creditors will draw their own conclusions about your situation and will be more likely to escalate their collections activity. Explain the situation and what you are doing about it.”

He adds: “Don’t make false promises, but, where you can, state your intention to pay – how much and by when.”

Managing debts

Robin Tarling, managing director of Bridgewood Debt Solutions, gives his advice on how to deal with fiscal problems:

Only offer to pay what you can afford – a common mistake is to agree payment arrangements with creditors that subsequently cannot be honoured because the business isn’t generating sufficient income to cover these payments. The result of this will usually be either a failed payment arrangement or incurring further debts.

Keep in mind that the only money you have to pay towards debts is what you are making in profit. Produce a monthly cash-flow forecast for the year. 

Treat creditors equally – ideally they should all receive their fair share of what available income you have. It also helps to make each creditor aware of the total debts you have, since understanding the “bigger picture” will often help ensure that they accept a payment proposal that is affordable.

Seek specialist advice – debt issues, and the various solutions available, can be very complicated and there is often not an obvious answer. Rather it will be a matter of assessing the pros and cons of various options and making an informed choice about the best way forward. This is where talking to a specialist debt adviser, who is known and trusted, can be very beneficial. 

IVA advice

A Cheshire licensee, who has just come through a five-year IVA supported by Bridgewood, says: “We delayed making the decision to go into an IVA (individual voluntary arrangement) and I wish we had made it sooner. Don’t kid yourself. Be realistic – this is where involving a third party to help you resolve your situation really helps.”

He adds: “When you are in debt, you are stressed and at a low ebb, and your confidence isn’t there for dealing with companies so it is important to have someone to negotiate with creditors for you and offer you help and advice along the way. Our debt payments were very high and we couldn’t manage them so Bridgewood helped renegotiate for us.”

The licensee also renegotiated rent with their pub company too. He says: “We were very transparent with our figures so they could see what we could afford and what profits we were making and were able to keep and move forward in the business.”

Solutions and support available

Serious debts need not spell the end of your business. As a spokesman for the Insolvency Service says: “It is important for companies in distress to realise they do have a range of options available to them before they decide to close their doors for good. 

“There is a vibrant business turnaround advisory sector in the UK that has experience at helping troubled businesses return to profitability.”

The spokesman adds: “Even when a company is in serious difficulty, it remains possible to reach agreement with your creditors to help you continue the business. You should seek advice from a qualified insolvency practitioner who can help you secure the best outcome for you, your business and your creditors.”

But if the only option for you or your business is to go bankrupt then there is a wealth of help and support available to help you, including from the Licensed Trade Charity.

Richard, a former licensee who went bankrupt last year, says: “In my situation, it was a big relief to go bankrupt. I slept at night when I hadn’t been sleeping at all with the stress of everything. The Licensed Trade Charity is such a great organisation to help people in this situation. It isn’t just one-time support they offer. It has been ongoing help including advice and financial assistance.”

The Cheshire licensee adds: “The IVA has made us stronger and we review everything in the business more regularly now, including supplier costs. We are in a better place now to ride out problems, with contingency funds to cover every eventuality.”

For licensees with past financial issues, worried about getting finance in the future, Thompson of Acorn Finance says: “There are lenders in the market for almost any situation – so even if you think it’s impossible, it’s worth talking to a specialist licensed trade broker to discuss your options. An initial assessment should always be free.”

Bridgewood’s Tarling adds: “Debt isn’t the end of the world for licensees. It is possible to get out of it and move forward positively and we have seen hundreds of licensees do this.” 

Avoiding debt

Tips from Alex Clarke of EKW Group 

Control margins and stock

Businesses can benefit from having a professional stock taker who specialises in the trade – ideal for spotting the early signs
of problems and can be key to ensuring profitability. Selling at the right price, reducing wastage or protecting your stock could make the difference between being a struggling or a thriving business. 

Business intelligence 

Businesses need to ask themselves: what sales do you need each week to break even? What does it cost to open your doors every day? What liabilities do you have and when are they due? Knowing if you’re profitable and when cash might be tight can allow businesses to develop and grow. Bookkeeping is an essential prerequisite for preparing management accounts and a vital tool for businesses. 

Staffing your business

Wages are a big cost to any business and controlling the level of this cost is crucial. As a general rule of thumb, a pub selling food should have a wage cost between 25% and 30% of turnover; in comparison to wet-led pubs, which is expected to be between 15% and 20% of turnover. Knowing when you’re busy, what staff are required and when, will keep your business profitable and lean. 

Monitor rent and rates

Ensuring that you’re paying the right amount of rent and rates can help manage debt levels. Are you eligible for a rates reduction? Does your business need a new rent review? 

Related topics Professional Services & Utilities

Related news

Show more


Follow us

Pub Trade Guides

View more

The MA Lock In Podcast

Join us for a Lock In