Dealing with creditors

Dealing with creditors

When a business is struggling financially it will inevitably struggle to pay creditors. Those creditors will understandably want to arrange payment and this can lead to an escalating cycle of creditor pressure for the Directors. Being chased for payment you do not have is unpleasant and it is understandable that many Directors put off dealing with the debts but this is never a good move. You need to take action and get a good perspective on the debts as well as dealing with the creditors. Ignoring them or putting off handling things will only make it worse. 

These are some of the common questions we are asked about creditors and how to deal with them.

 

Creditor Pressure

Creditors will naturally want to be paid and once a business is struggling financially it is not uncommon for the pressure to build on Directors to resolve the outstanding debts.

There are several things you can do to address the problem such as:

  • Talking to your creditors to arrange a payment schedule
  • Undertaking a review of your cashflow to see what money can be made available
  • Looking at a Creditors Voluntary Arrangement

Taking action is vital though because your creditors are not going to go away or stop chasing.

More details on what you can do can be found by clicking here

 

County Court Judgements (CCJs)

A county court judgement (CCJ) can cause a lot of problems for a business so it is important that you prevent them where possible and deal with them if they do occur.

CCJs are a common and relatively easy way for creditors to put pressure on a failing business to pay outstanding debts. If you receive a threat of one your options are limited:

  • Arrange payment in full
  • Arrange a monthly payment plan
  • Dispute the claim and/or request the judgement is put aside
  • Pay in installments

Once a creditor has successfully applied for and been granted a CCJ it will go on your records and affect your credit score and your suppliers will be less inclined to offer credit, so you need to deal with the situation quickly.

Click here for more details of how CCJs affect you and what you can do about them.

Winding up orders

Your creditors have various options open to them if you are unable to pay your debt. One of the most serious in terms of your business being able to continue to trade is a winding-up order. 

This will be preceded by a Statutory Demand. This is an ultimatum demanding you arrange payment or a petition will be made to wind up your business. DO NOT IGNORE THIS DEMAND! If the creditor has issued this it will usually go to court order after 21 days.

Contact them and arrange payment if you can. You may still be able to come up with some deal or arrangement to resolve the problem without going to court.

 

If you do receive a winding-up order then it will be advertised and result in severe actions from the bank and your creditors which could effectively stop you from trading.

You have limited options. These could include:

  • Payment in full
  • Arrangement to pay over time
  • A Creditors Voluntary Arrangement
  • Further finance
  • Administration
  • Creditors Voluntary Liquidation

Often creditors will go for a winding-up order to meet the terms of their insurance. Whatever the reason it is a very serious situation and you should call a professional for advice. 

Click here for more information on winding up petitions and statutory demands.

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If you think your business may be insolvent it is important to get help as soon as possible

Call us for a free initial discussion 

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