Advice for businesses facing supplier pressure

If you’re finding it difficult to settle bills with your business suppliers, and payments are running late, think about discussing a payment schedule with those you owe money. Alternatively, you could explore a formal insolvency arrangement with the help of a licensed insolvency practitioner, like a Company Voluntary Arrangement (CVA). Other choices might involve seeking commercial finance or opting for voluntary liquidation.


What happens if you can’t pay your suppliers?

If your business is struggling with poor cash flow, it can be tough to keep up with payments to suppliers. Even if suppliers are okay with occasional delays, it could eventually lead to legal action against your business.

You only need to owe £750 before a supplier can ask the court to wind up your business. If creditor pressure is building up, you must act quickly to save your business. This threshold has increased to £10,000 due to the government’s temporary measures from 1 October 2021 to 31 March 2022.

First, check with a licensed insolvency practitioner (IP) to see if the company is insolvent. Regardless of the outcome, there are different ways to handle the situation.


Is the business viable for the long term?

If your money troubles seem temporary, and there’s a chance your business can become profitable again, a Company Voluntary Arrangement (CVA) might be the solution. This official way of sorting out debt could work well if your business has valuable assets and predictable cash flows.

For sole traders, a similar process is called an Individual Voluntary Arrangement or IVA. Both methods aim to reorganize your debt, letting you repay a part of what you owe over a longer time and, importantly, at a rate you can manage.

As long as you stick to the repayments, your business is safe from legal actions by creditors. Remember, these processes are legally binding, so if they don’t work out, creditors might try to close down your business by filing a winding-up petition.


Are your suppliers trying to wind up the business?

If you run a limited company and struggle to pay suppliers, they might take legal action to close it down. Administration can give you a helpful break to evaluate the company’s situation and figure out the best next steps.

There are different ways out of administration, like selling the business, a voluntary arrangement (as mentioned before), and liquidation. Company administration also stops legal actions against the company, making it a common way to handle the looming threat of closure.

One downside of administration is that you lose control of the company when the office-holder takes over. Still, the overall process buys you valuable time if a supplier is close to filing a winding-up petition.


Can I enter voluntary liquidation if I can’t pay my suppliers?

The situation might be really serious, and the only choice could be to shut down the company willingly to stop more losses for suppliers. Creditors’ Voluntary Liquidation (CVL) is an official process for insolvency that needs to be handled by a licensed insolvency practitioner.

It means using the money from selling the business assets to pay off creditors as much as possible. Unfortunately, it also means closing the business and everyone losing their jobs. If you work for your company as well as being a director, you might be able to claim redundancy just like your staff, though.  

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Informal negotiations with suppliers

If the situation seems less serious, and you think your suppliers might be willing to talk, you could casually reorganise your debts with each supplier and pay them back over a longer time.

This would ease the pressure on your cash flow and stop things from getting worse. But, of course, whether your repayment ideas are accepted depends on how you’ve handled repayments before and your overall relationship with your supplier(s).

Vanguard Insolvency can point you in the right direction when you can’t pay your suppliers. We’re experts in dealing with insolvency and have lots of experience helping businesses get out of debt. Give us a call today to set up a free consultation on the same day – we have offices all over the UK, so professional help is never too far away.

David Jackson MD
Senior Partner at Vanguard Insolvency Practitioners | Website

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.