When you are owed money, hindsight can be a wonderful thing.

All too often in the rush to complete a business transaction or lending money to a friend in need, you won't think to put in place a legally binding agreement that formalises the arrangement beforehand. After all, you have every intention of holding up your end of the deal and so assume the other party will too.

But if payment doesn't happen and your previous agreement starts turning into a dispute over what is owed, you may need to consider what legal avenues are open to you to get your money back.

The success of any legal action will then depend on what evidence you can provide to show that the debt is owed.

A contract between two parties does not have to be a signed document, contracts can be formed verbally.

While it is ideal to have a written agreement which outlines the a financial arrangement and the terms both parties have agreed to. If the same areas were covered in a conversation, then a legally binding contract may still have been formed.

The key legal principles of a contract are:

• Offer - An offer is made by one of the parties to the other (e.g. "I will lend you £200 for two weeks", provide a quote for a piece of work etc.)
• Acceptance  - The other party confirms that they accept the offer
• Consideration - Each party provided something of value to the other (e.g. pay money, pay interest, provide a service, supply goods etc.)
• Create legal relations - It is the intension of both parties that the agreement should be enforceable in law if breached
• Capacity - Each party has the capacity to enter a legally binding contract (e.g. over the age of 18 etc.)

​If these principles have been met verbally, then a contract may have been formed which you can take legal action to enforce if the terms are breached.
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Yes, but the 'burden of proof' will be on you as the Claimant to show that the amount you are claiming is due. Court should be your last resort in attempting to recover your money and so you should be confident that you have a strong case, sufficient evidence and follow the set pre-action procedure prior to issuing a claim (e.g. sending a letter before action, attempting negotiation etc.)

Ultimately the decision on who owes what will be down to a judge's ruling based on:

1. The applicable law (i.e. breach of contract)
2. The evidence that you can provide
3. The evidence supplied by the defendant/debtor
4. The balance of probabilities

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In the absence of a written contract or agreement being in place, there are various other pieces of information that you may be able to secure which can provide evidence that the money is due.

Bounced cheque or returned direct debit
While the use of cheques is diminishing, over 129 cheques are still issued every year. If your debtor has sent you a cheque that bounced or agreed to a direct debit that has been returned, it is often all the evidence that you need to prove a debt is owed.

In law a cheque is considered a 'promise to pay' and so can be used as a clear admission that money is due.

Unpaid invoices
It is not uncommon for a business to invoice without a signed contract. Most businesses use invoices to request payment so providing copies and proof of them being issued to a customer or supplier will go a long way in proving that a debt is owed, even if they aren't directly attached to Terms of Business or a written terms.

Furthermore, if you provided regular statements of the amounts owed and showing overdue, then these will also be useful as evidence.

Evidence of chasing debts
Once a payment is overdue you will have hopefully contacted the person or company to chase the debt.

Emails, letters, texts or messages exchanged on social media (Facebook, WhatsApp, Snapchat etc.) can all be used to help prove a debt is owed and overdue.

If the other party has responded to you apologising or asking for more time, then this admission will be extremely valuable in proving that they don't dispute that they actually owe the debt. So, it's important that you save or screenshot these messages in the event they are needed.

Loaned money without a contract
Without an I.O.U. or a loan agreement in place, proving that money provided to someone was a loan that needs to be repaid can be difficult. This is because often money given to friends, an ex, or family member is considered a gift and so isn't required to be paid back.

Enforcing a verbal agreement that money is owed will hinge around providing evidence to show that the cash was transferred as a loan along with any repayments, e.g.

• A bank statement showing a transfer or cheque to the person's bank account
• Repayments received into your account that stopped
• Your account history that large cash gifts are not made to the person on a regular basis
• Evidence of your income, outgoings and savings showing it's unlikely that you could afford to give the amount as a gift

Witnesses to the arrangement
When little or no documentation exists to prove a debt, having an independent witness to a verbal contract can be invaluable.

For example - with a business transaction, did an employee take the order over the phone, deliver goods or perform a service where payment was verbally agreed with the customer? If money was lent to a friend, was another person present to witness the agreement of how/when they were going to pay you back?

But even if an independent witness isn't available, you as a claimant can also present your version of events to the court in a written witness statement. Any witnesses may then need to attend court should the claim go all the way to a hearing.
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Without a written agreement, there should still be plenty of information that you can pull together to prove what you are owed. However, if the other party disputes the amount, or that any debt is owed at all, then you may have a fight on your hands that needs to be settled in court.

It will then be down to the evidence you can gather and how your claim is pleaded to convince a judge that you are entitled to the money owed in the absence of a legally binding written contract. So, obtaining legal advice on the evidence needed for a debt recovery claim and your prospects should be your starting point.
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Non or late paying customers are unfortunately a fact of life for most small to medium businesses. While at best delayed payments can be annoying, at worst they will have a measurable and detrimental impact on the smooth running of your business.

Recent figures via the Official Statutory Register of Judgments has given an insight into the potential scale of the problems around business debts and disputes that have been escalated to the courts.

The data shows that in the second quarter of 2025, there were over 45,000 County Court Judgments (CCJs) issued against businesses. Just over a quarter of the unsatisfied commercial judgments in England and Wales were for amounts greater than £3,000,

While there are fixed fee debt recovery services available to deal with most size B2B debts, needless to say it's more important than ever to make sure you have effective procedures in place for protecting cash flow in your business.

So, we wanted to share some tips for handling non-paying customers that we've provided to our clients after helping them recover business debts owed to them.​

Is sounds simple, but make sure you know who you are doing business with.

Try to find out the size of the organisation and whether they are a partnership, sole-trader, limited company or PLC. ​What is their full legal name and do they use any trading names? Conducting a quick Internet search for these names may reveal information you need to be aware of.
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Make use of public services such as Companies House to verify your private limited company customers.

When first considering doing business with them, verify their registered office, company number and trading status. You can use this information to find who owns the business and verify that the person instructing you has the authority to do so on behalf of them.

​Then throughout your relationship put a reminder in to recheck these details periodically. That way you can be alert to any warning signs such as overdue accounts, charges being registered against them or large drops in cash reserves which may indicate their business is struggling.
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Check if your business customer is part of the Government's Fair Payment Code (FPC) which encourages businesses across the UK to pay fairly and quickly, within 30 or 60 days. The current awardees can be found on the FPC website.
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Whenever possible try to request payment in advance. If this is not possible, attempt to secure partial payment (for materials etc.) or some kind of deposit.

With some larger business customers it can take a while for a new supplier to get onto their accounts systems. So starting this process as soon as possible can speed up future payments.

Invoice as soon as the order is completed, or on lengthy jobs gain agreement to do so at periodic intervals. Knowing there is a payment problem half way through a job is better than finding out at the end.
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Include standard payment terms within your T&Cs and on your invoices, ensuring they are clear and reasonable.

​Make customers aware of these terms before they order, when you provide a quote and when an invoice is at risk of becoming overdue. Your invoice should also include details on how to pay you, such as your bank account or online payment information.
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For large or regular transactions consider getting a specific contract drawn up and signed by both parties. At the very least ensure the main points of the order or transaction are in writing with evidence that it has been agreed by each party.

​If you ever end up having to consider legal action, good record keeping will pay dividends.

​Everything from the original order, proof of delivery and late payment chases should be kept. Your solicitor will want written evidence and a chronology of events to proceed with a claim, so keep copies of any emails and notes of any telephone calls.
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Implementing the above tips may help in reducing the chances and impact of late paying business customers. But even with the most vigilant owner, on-the-ball accounts team and strictest terms and conditions, you will still encounter customers that simply choose not to pay.

So your next step is to consider formal legal action to recover the amount owed, which usually starts with sending a Debt Recovery Letter Before Action.
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Having robust Terms & Conditions, a consistent approach to invoicing, and a clear paper trail will help you get what's owed to you that much quicker and assist your legal claim should you ever need to get a solicitor involved.

When a friend asks to borrow money it can be difficult to refuse. We don't think twice about saying no or hanging up on telemarketers that want us to part with our money, however when it's someone familiar that is asking, your usual good judgement can quickly disappear.

But if after you have given the loan, your trusted friend disappears just as quickly or repeatedly says they are broke, then you've now got a dilemma.

This scenario is unfortunately all too common, with Starling Bank finding that a third of adults in the UK are owed money by friends, family or work colleagues. With 77% of these lending money to friends or family for amounts over £50.

​After repeatedly asking your friend for the money back, being reasonable and understanding of their circumstances but ultimately being left out of pocket, how can you get money back from someone who borrowed it?

Can you actually take your friend to court?​
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Before involving the court you need to think about your prospects of success. You'll need to have some kind of evidence that you lent the money in the first place and that your friend hasn't paid you back as agreed.
 
If you've got a signed contract, loan agreement or IOU then that's ideal, but the evidence of the loan doesn't always necessarily have to be written.

A legal contract can be verbal if it was just an arrangement you discussed and agreed between yourselves, however there still needs to be something that a court can see, like:

• E-mails, text messages or social media messages discussing the loan, debt and repayment plans
• Bank statements of you initially transferring the money to their account or online payment transfer with reference to it being a 'loan'
• Evidence of repayments being made into your bank account (which then stopped)
• Someone else being present when you agreed to the loan who could be a witness and is willing to provide a statement

If you lend someone money and they don't pay you back, then the legal action is basically a claim for a breach of contract. Therefore as a claimant the responsibility is on you to prove that a contract was made and it's terms have been breached.

You can't get blood from a stone, so if your friend has no cash or assets then there may be little gained from taking them to court. It will cost you money to issue the claim and you'll rack up further fees to enforce any judgment from the court (bailiffs etc.) to perhaps end up with nothing or very little.

But if your friend is employed, owns a car, has equity in a house or some other assets that would cover the debt then it's reasonable to assume that you can make a recovery from them by going through the courts and obtaining a County Court Judgment (CCJ) against them.
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If you've secured evidence of you making the loan and believe your friend has the means to pay you back, then it's time to start getting serious. Sometimes the realisation that you're willing to take the matter further can snap your friend into action.

First step is to write a simple (but formal) 'Letter Before Action' which gives your friend a final chance to settle the debt before court proceedings are started.

As a minimum your letter should include:​​

• A reasonable time-frame for them to repay in full, this should be seven days as a minimum
• Advising them that if payment isn't forthcoming then you intend to issue county court proceedings
• A summary of the loan including the amount, date started and when it should have been repaid

Keep a copy for yourself and send the letter in the post to their home address, or where they are currently living.

The best outcome is that your friend pays you back or at the very least you agree a payment plan that starts to recoup the loan. That way you avoid court costs and will eventually get your money back. If your friend subsequently fails to comply with the payment plan then at least you'll have further evidence to help with court proceedings.

Also if you want to add additional weight to your claim, you can get a solicitor to draft and send the debt letter which should only cost around £60.00 including VAT.
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The last resort in recovering your money is to take your friend to court. This is normally done through the small claims court (for amounts up to £10,000) and will involve you completing some paperwork, submitting it to the court and paying a court fee.

Instructions on how to make a claim can be found on the Gov.uk website. Straightforward claims are able to be done on your own with a little time and effort, but can get complicated if the claim is defended, interest needs to be calculated, or you think bailiffs will need to be instructed etc. As such depending on the amount, it may be wise to instruct a solicitor to handle the claim who should be able to do elements of this for a fixed fee plus disbursements (the court fees). Some of your legal costs can also be recovered from the debtor as part of your claim.

Remember getting money back from a friend, an ex-partner or family member can be a complex and emotional process, so having your lawyer draft the proceedings, provide advice and deal with ongoing contact with the debtor may help in the long run.
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​Being owed money by a trusted friend who won't pay you back is never a good situation to be in, and how you proceed will likely be determined by how much you want to maintain the friendship.

If your friend is in real financial difficulty then piling on court proceedings may not help them or their family, so you may want to consider the full impact of taking matters further. But this is a judgement and a financial call that only you can make. It is also worth noting that you generally have six years to start legal proceedings to recover a debt.

You should never feel guilty about pursuing money owed to you which you lent in good faith. Remember if anyone has jeopardised your friendship it's a friend who has decided to stop paying and communicating with you.
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