Commercial Debt Recovery: Your Options as a UK Business

What counts as a commercial debt?

A commercial debt is money owed between businesses as a result of a contract or trading relationship. It includes:

• Unpaid invoices — for goods supplied or services delivered
• Trade debts — between suppliers and buyers
• Professional fees — owed to consultants, architects, surveyors, engineers, and agencies

Commercial debts are different from consumer debts. The rules, the rights, and the recovery options are different too — and in many cases more straightforward.

Debts owed by consumers are different: the Late Payment Act does not apply to them, and Dispute Neutral does not currently decide disputes involving consumers.

A note on construction work

Under a construction contract with a business, either party has a statutory right to adjudication under the Housing Grants, Construction and Regeneration Act 1996, even if the contract says nothing about it. Neither side has to use it, and the parties can agree to use Dispute Neutral instead. Many smaller jobs run on little more than a quote and an acceptance, with few terms, which is why a Dispute Neutral clause in your terms of business helps. Work for homeowners is a consumer contract, so consumer law applies and Dispute Neutral cannot currently decide it.

Send a formal letter before action

Before taking any further step, you should send a formal letter before action (LBA). This puts the debtor on notice that you intend to pursue the debt and gives them a short window to pay or respond: 14 days for a business, or 30 days if the debtor is a sole trader or other individual, under the Pre-Action Protocol for Debt Claims (with the information sheet and reply form).

An LBA is not the same as a final demand. It is a legal step that courts expect to see before a claim is issued. It also sometimes prompts payment on its own, without any further action needed.

Claim statutory interest and fixed recovery costs

Under the Late Payment of Commercial Debts (Interest) Act 1998, you are entitled to claim statutory interest on overdue commercial invoices at 8% above the Bank of England base rate. The rate is fixed for each debt: it uses the base rate in force on 31 December for debts falling due between 1 January and 30 June, and the base rate in force on 30 June for debts falling due between 1 July and 31 December. Base rate has been 3.75% since 18 December 2025, so the rate is 11.75% a year for debts falling due in 2026. Payment is late after the due date in the contract. If there is no agreed date, it is late 30 days after the later of delivery (or performance) and the customer receiving the invoice. You can also add fixed compensation of £40, £70, or £100 depending on the size of the debt.

These rights apply automatically to business-to-business contracts. A contract can only replace statutory interest with its own remedy if that remedy is substantial. A dispute does not remove the right either: if the debt turns out to be owed, interest and compensation run from the original due date. Many businesses do not realise they can add these amounts to what they are chasing.

Use a private neutral decision service

If the debt is disputed — meaning the other side is not simply ignoring you but is actively contesting the invoice or the contract — a private neutral decision service offers a practical route to a binding outcome.

Both parties agree to appoint an independent neutral, an independent lawyer with at least 15 years' practical experience, acting as an expert, not an arbitrator, who reviews the contract, the documents, and the written submissions from both sides. The neutral then issues a binding decision, without a hearing, without solicitors on either side, and within a fixed timeframe.

At Dispute Neutral, that decision is issued within 10 business days of the matter being ready. Fees are fixed by band: £650 (claims up to £4,000), £900 (£4,001 to £10,000), £1,200 (£10,001 to £25,000) or £1,500 (£25,001 to £150,000), plus VAT, or £1,500 plus VAT for a non-money decision on a commercial matter. Each side's written case can run to 15, 25, 30 or 50 pages for those bands (50 pages for a non-money decision). The process is private, and the outcome is binding. It is designed for disputes between businesses (companies, partnerships and sole traders acting in the course of business) up to £150,000, including unpaid invoices, trade debts and professional fees, in England and Wales and Northern Ireland.

Issue a court claim

For debts that are straightforward and undisputed, a court claim is an option. Claims up to £10,000 usually go to the small claims track in England and Wales (Northern Ireland's limit is £5,000), which is relatively accessible for businesses without legal representation.

For larger amounts the process becomes more complex, more expensive, and slower. Claims above £10,000 go to the fast track (up to £25,000), the intermediate track (£25,000 to £100,000, since 1 October 2023) or the multi-track; in April to June 2026 they took a median of 55.9 weeks to reach trial (HMCTS civil justice statistics, April to June 2026). Even a successful judgment does not guarantee payment — enforcement is a separate step.

Use a debt collection agency

Debt collection agencies work on a commission basis, taking a percentage of whatever they recover. They can be effective for chasing straightforward unpaid invoices, but they have no power to resolve a genuine dispute, and their fee reduces your net recovery.

Which route is right for you?

The answer depends on two questions: is the debt disputed, and how much is it worth?

For a straightforward unpaid invoice where the other side is simply not paying, a letter before action followed by a court claim or collection agency may be the most direct route.

For a disputed debt — where the other side is contesting the invoice, the work, or the contract terms — a private neutral decision service is usually more appropriate. Court proceedings for disputed debts are slow and expensive. A neutral decision process resolves the disagreement directly and produces a binding outcome far faster.

For debts up to £150,000 where speed, cost, and certainty matter, and both sides agree to use it, Dispute Neutral is built specifically for this situation.

What is the difference between commercial debt recovery and consumer debt recovery?

Commercial debt recovery involves debts between businesses, typically arising from contracts, invoices, and trading relationships. Consumer debt recovery involves debts owed by consumers, meaning individuals acting outside a business. The legal framework, the recovery options, and the costs involved are different. Commercial creditors generally have stronger rights, including automatic entitlement to statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998.

How long does commercial debt recovery take?

It depends on the route. A letter before action sometimes prompts payment within days. In April to June 2026, small claims took a median of 41.0 weeks to reach trial, and fast, intermediate and multi-track claims 55.9 weeks (HMCTS civil justice statistics, April to June 2026). If both sides agree to use it, Dispute Neutral produces a binding decision within 10 business days of the matter being ready.

Do I need a solicitor to recover a commercial debt?

Not necessarily. For smaller, straightforward debts many businesses handle the process themselves. For disputed debts, a private neutral decision service like Dispute Neutral does not require either party to instruct a solicitor. The process is document-based and designed to be accessible without legal representation.

Can I recover my costs of chasing the debt?

Yes, in many cases. Under the Late Payment of Commercial Debts (Interest) Act 1998 you can claim fixed compensation of £40 for debts under £1,000, £70 for debts between £1,000 and £9,999.99, and £100 for debts of £10,000 or more. You may also be able to claim reasonable recovery costs beyond those fixed sums if your actual costs were higher.

Ready to recover what you are owed?

If you have a commercial debt of up to £150,000 and the other side will agree to a private decision, Dispute Neutral may be the right place to start.

Both parties agree • Private • Banded fixed fees • Binding decision within 10 business days of the matter being ready