Falling behind on your outgoing payment to creditors is something that happens to businesses all the time, it doesn’t always mean there are fundamental problems, but can certainly have big knock-on effects. So, how can you deal with that pressure? And how can you deal with creditors constantly pursuing you for money?
Why are creditors pursuing you?
Normally when creditors are pursuing you, it’s because you haven’t paid an outgoing invoice. This can be for a number of reasons, lack of funds, waiting on incoming invoices, bad take-ins, an unexpected large cost. The majority of creditors will look to recoup what they’re owed straight away, but don’t forget, that if you have a 30-day period, you can push off any advances until the last day of your repayment terms.
What can creditors do to get what they’re owed?
Firstly, they’ll just flat out ask for it. Telephone, email, or post, however, they should only be pursuing you during working hours. If that has failed to work and you haven’t been able to come to some kind of negotiation, your creditors may look to push for debt collectors, or go through the courts.
What are creditors likely to do?
- Pursue you for payment, through post, phone or email.
- Employ a debt collector to receive payment.
- Go through the courts and send a County Court Judgement.
- Pursue a winding-up petition to force your business into paying.
What can be done to stop this pressure?
It’s important that you don’t simply bury your head in the sand. Ignoring any kind of contact from your creditors asking you for payment, is not a good idea. If you act quickly you can solve the issues ahead. First off, you may be able to negotiate. If you’re waiting on a payment yourself, or have simply had a bad moment, tell them your situation and work out what kind of agreement you can come to, it could be a partial payment, or an extension.
Repayment Arrangements
If you find negotiation with your creditors to be unsuccessful, there more formal repayment methods to ensure that you can continue trading whilst repaying your creditors. An arrangement like this is known as a Company Voluntary Arrangement and is set up, in order to allow you to pool all your creditors together and repay them in monthly instalments. Once agreed to it will give you protection from creditor pressure.
Alternative means of repayment
Coronavirus has put back a lot of businesses, so not being able to pay creditors has become a common theme. However, the government did introduce varying levels of support, with the Bounce Back Loan scheme (now ended) and more recently the Recovery Loan Scheme. You can apply for this scheme through the government website.
There are also more traditional means of financing your way out of trouble, with invoice financing, and commercial finance as options that businesses typically use.
Summary
Pressure from creditors can be stressful and is always likely to come if invoices don’t get paid within a reasonable time frame. Creditors are within their right to put that pressure on you however, this should never be harassment. Reaching out to your creditors is the best way to start and should put you in good stead, but if this doesn’t work there are other means of repaying your creditors.
