Can small businesses access informal insolvency solutions?

Yes, many small businesses resolve financial difficulties without entering formal insolvency procedures. Informal arrangements often involve negotiating directly with creditors to extend payment terms or reduce repayment amounts. HMRC, for example, may agree to a Time-to-Pay arrangement that allows tax debts to be repaid over several months. Banks and trade suppliers may also agree to revised terms if they believe the business has a viable future. Unlike formal insolvency procedures, these informal deals do not provide legal protection from creditor enforcement. That means they rely heavily on creditor cooperation and the business maintaining good communication. While not suitable for every situation, informal solutions can buy valuable time and preserve customer and supplier confidence. They are often most effective when financial problems are identified early and directors demonstrate a clear plan for recovery. However, if creditors lose confidence or formal action such as a winding-up petition begins, directors may need to escalate to formal insolvency procedures.