Struggling With Creditor Pressure? Here’s What To Do Next

worried business woman with head in hands looking at her phone

If you’ve fallen late on payments and are struggling to pay your liabilities, then you may be facing increasing pressure from your creditors. They’re likely to be chasing you for payments, and in more severe cases, may have issued a Statutory Demand or Winding Up Petition. Creditor pressure is a symptom of a larger issue. It indicates that there are areas of the business requiring prompt attention, whether that’s cash flow problems, mounting debts, or internal operational issues. In some cases, it may be the case that the company is facing insolvency.

So, if your business is facing creditor pressure, it’s essential to address the problem head on and as swiftly as possible. The worst thing to do is to bury your head in the sand, and allow issues to escalate. This will only increase the pressure that you face from creditors, and if Statutory Demands and Winding Up Petitions are left unaddressed,  they could well lead to the company being forcibly closed down. 

In other words, creditor pressure is a sign you need to take action. These are the steps you can take:

Communicate With Your Creditors

If you have only started to notice creditor pressure recently, then your first course of action should be to communicate directly with your creditors. Explain why you’ve fallen late on a payment, and emphasise your commitment to making the full repayment as soon as you can. It’s in their interests to maintain a debtor-creditor relationship with you, and so they may be open to renegotiating repayment terms, giving you the time that you need to get back on track. 

Instruct A Licensed Insolvency Practitioner 

If you are unable to negotiate effectively with your creditors, simply don’t have the means to repay them any time soon, or have been threatened with legal action, it’s essential to instruct an insolvency practitioner promptly. They will advise you on the most suitable steps moving forward. Depending on the type of creditor pressure you’re facing, this may include the following options:

Company Voluntary Arrangement (CVA): If there is a realistic chance of the business being able to repay its debts, then a CVA may be a viable business rescue option for struggling companies. This is a repayment plan that’s agreed with creditors over a specified period of time. 

Liquidation: If a company is insolvent, then it is the duty of the directors to prioritise the interests of creditors. In some cases, this will mean liquidating the business, in order to release funds to make creditor repayments. A Creditors Voluntary Liquidation (CVL) removes creditor pressure quickly, preventing further legal action from being taken against the company, whilst ensuring all the affairs of the business are wound up correctly and efficiently. 

Administration: Entering administration protects the company from further legal action being taken against them by providing a moratorium. This gives the business breathing space from creditor pressure so that efforts can be focussed on organising the recovery or sale of the company on a going concern basis. 

Disputing the threat of legal action: Once a Statutory Demand or Winding Up Petition has been issued, there will be a short period of time in which it can be disputed. There will need to be legitimate evidence to support this, and an insolvency practitioner will need to advise you on whether or not it is suitable to dispute the claim. Either way, when issued with any legal action, it’s imperative to respond within the deadline set. 

In summary, it’s essential to tackle creditor pressure head on. At the first signs of trouble, be proactive in communicating with your creditors and seeking professional advice. This will provide you with a greater number of options for moving forward. In some cases, liquidation may be the best option for alleviating creditor pressure, however in many instances, it may be possible to implement a recovery plan for repaying the debt. 

If you are concerned about pressure from creditors, please don’t hesitate to contact our experienced team of insolvency practitioners at My Liquidation. Assessing your company’s individual needs, we will guide you through the next steps to take. 

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