Dealing with creditors can lead to a lot of stress and worry, but there are ways that you can help the situation. In this blog, we’re letting you know how to speak and negotiate with creditors when you’re struggling to pay your debts on time.
If you’re looking for advice on negotiating with creditors, your company is likely in some type of financial distress. You might be getting constant emails, letters and phone calls from suppliers, HMRC, or even the banks if you’re missing loan repayments. We’re going to let you know some ways to deal with these creditors.
How to speak and negotiate with creditors
Don’t ignore your creditors
Many directors choose to bury their heads in the sand, and while it may feel like it’s helping, it really doesn’t in the long run. Not doing anything can lead to further issues.
Something to remember is that your creditors want to keep you as a customer in most cases. If you’re a limited company and you liquidate, it’s highly likely that suppliers and HMRC won’t end up getting any money.
Be open and honest with your creditors
It’s very important to be straight up with your creditors if you can. If you can’t afford to pay them, let them know and try to organise some new payment terms. For you to negotiate new payment terms, you really need to understand your numbers. Whatever you do, don’t overpromise. It’s better to set payment terms that you know you’ll be able to afford. Another good idea is to let the creditor know that you’ll review the payment terms in a few months.
Speak to an insolvency practitioner
If your creditor turns down the proposed payment terms, you may need to have a backup plan. This may involve speaking to an insolvency practitioner. When negotiations fail, it can feel like your back is against the wall. You may need to start considering your other options, such as a company voluntary arrangement (CVA).
Suppose a CVA is suitable for your business. In that case, it involves you putting all of your unsecured creditors in one pot, be it HMRC, suppliers or any others, and you agree to pay the creditors over an extended period of time. Typically, this period is around five years, and you make one payment every month, which is split among creditors.
A CVA isn’t a viable option for everyone. If your back is so far against the wall, liquidation might be your only option. It’s very important to start seeking professional advice, especially when you’re starting to negotiate with creditors and organise new payment terms. These are clear signs that your business might be heading for insolvency.
The key takeaway from this is to make sure that there is always an open line of communication with your creditors. If you ignore their calls, emails and other communications, they will get fed up, and you’ll likely end up dealing with a winding up petition.
So, if you’re wondering how to speak and negotiate with creditors, do it early, keep them in the loop and be open and transparent. Please get in touch with us if you need any assistance or support.
I'm Chris Worden, Managing Director at 1st Business Rescue. With over 7 years of experience, I help UK directors navigate the complex world of UK corporate insolvency. We offer free and independent advice to UK directors and advise them about what options may be available to them if their limited company starts to struggle.
I am passionate about helping other directors overcome their business challenges and get back on their feet, as I was once in the same position as them. I had a business that became insolvent, and the advice out there was confusing and overwhelming. I am here to provide honest and valuable advice to UK directors.
I am proud to say that we are one of the only 5-star corporate insolvency companies on Trustpilot with hundreds of 5-star reviews, and we publish videos weekly on our YouTube channel. Our channel is designed to educate UK directors about insolvency and debt advice. Check it out here:
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