How to approach creditors when you cannot pay

Updated: 24th November 2021

Top tips for company directors when negotiating with creditors

There’s a lot at stake when you start negotiating with a creditor, but one of the best ways to gain their support is by clearly communicating an affordable payment plan. You also need to gain an understanding of their point of view, and how your non-payment is affecting them on a day-to-day basis.

Ultimately, they might be able to petition for the winding-up of your company, and if the creditor is HMRC, this often happens quickly.  They can take enforcement action without a court order, so there is potentially a lot at stake for your company.

With this in mind, here are a few tips to boost your chances in negotiations with all creditors:

Know your figures

You need to know how much you can afford to pay, and be prepared to explain why your company is in its current financial position. You can only do this convincingly by knowing your numbers, and understanding what has caused the problem.

It’s a good idea to obtain professional advice before approaching a creditor. An insolvency practitioner (IP) will ensure the business can support any proposed repayment plan, and will instil confidence in your creditor that you’re receiving the best advice.

You can also back up negotiations by preparing a copy of your accounts, showing how you’ve arrived at the proposed figure, and that you can afford the repayments.

Be prepared to develop a back-up plan

The chances are that your creditor will refuse the initial offer, demanding either a shorter repayment period or a higher monthly amount. It’s important, therefore, to have a ‘Plan B.’

An IP will be able to advise whether you’re eligible for a formal insolvency procedure, such as a Company Voluntary Arrangement (CVA).

If you meet the criteria and your insolvency practitioner believes it is appropriate, this particular process could allow you to trade your way out of difficulty whilst retaining full control of the company.  

Will you undertake negotiations yourself?

If you decide not to seek help from an insolvency expert, you need to be well-prepared prior to negotiations. It’s a good idea to write down the main points of your proposal so nothing is missed, and to expect some questions from your creditor.

Negotiating with HMRC can be particularly stressful. As we mentioned earlier, they have the power to take action quickly, but if you’ve been responsive to their communications in the past they may be willing to consider extra time to pay.

Keep communications open

Being available to speak to your creditors and quickly respond to any queries or requests, can help negotiations from the start. It demonstrates your commitment to repaying what is owed, and encourages a more trusting business relationship.

It’s worth remembering that even though you’re struggling to repay, they won’t want to lose you as a customer, so make sure they’re aware of your long-term commitment and intention to get back on track as soon as possible.

Enlist professional help

Insolvency practitioners can offer advice at any stage of proceedings, and are instrumental in helping companies avoid financial difficulties. If you fear your situation will only worsen, the input of an insolvency practitioner can make a huge difference.

A licensed IP will have contacts within the finance industry that can help with urgent financing, and will offer confidence in your ability to repay.

Real Business Rescue has a network of offices around the country, and can assist in negotiations with creditors. We offer independent advice and a professional perspective. Call one of the team for a free same-day appointment to discuss your needs. With 100 offices stretching from Inverness down to Exeter, Real Business Rescue can offer unparalleled director advice across the UK.

Keith Tully


0800 644 6080
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