Turnover can disguise money that is already committed
A busy trading month does not necessarily provide spare household income. Sales receipts may need to cover materials, subcontractors, tax and future business costs before anything is available for personal spending. When those amounts are mixed together, borrowing can hide the shortage until several creditors require payment at once. Establish which debts belong personally to the trader and which relate to a separate company or a personal guarantee.
Use two connected budgets rather than one optimistic forecast
Business Debtline provides UK guidance that considers business and personal finances together. Prepare realistic trading figures, tax demands and essential household costs, including quieter periods and overdue customer invoices. An adviser can help assess whether a repayment proposal depends on income that is genuinely likely to arrive. Borrowing to maintain an unviable activity requires particular scrutiny because it can increase personal exposure without repairing the underlying trading problem.
