Trying to make ends meet when your business is struggling financially can be extremely stressful and how do you stop creditor pressure? Maintaining a healthy level of cash-flow is one of the main challenges that small businesses face. Limited access to funding can further compound your problems, making it increasingly difficult to run a business effectively.
On top of these problems, creditor pressure can really up the ante and make a business owner feel like the walls are closing in. If your business is unable to make payments to its creditors, the reality is that the pressure will intensify until the payments are made.
Creditors have a number of tools at their disposal to recover the money they are owed. This ranges from charging interest on late payments or even employing a debt collector, to pursuing legal action such as statutory demands and County Court Judgements (CCJs). The consequences of legal action can be serious, with insolvency, and ultimately the company’s liquidation, a real possibility.
Ignoring creditor pressure is not the answer
Pressure from creditors can be extremely hard to deal with. You can avoid emails and phone calls from your suppliers, but this is not a problem that will simply go away. A difficult situation can be made worse if you’re dealing with a particularly aggressive creditor like the tax man. HMRC has a number of serious methods of recovering lost payments from your company.
If you choose to deal with the situation head on, there are a number of options available to you to cease creditor pressure. Your options depend on the nature of your cashflow problem and the amount of debt your company owes. However, you must face up to the problem quickly. The earlier you act, the sooner you’ll be able to stop the creditor pressure.
Option 1 – Negotiate
Many small businesses experience short-term cashflow problems that are resolved when a substantial payment is received. If you’re awaiting a payment of this kind, you could try to resolve the issue by explaining your predicament to the creditor. Late payments are a huge problem for UK small businesses, and most creditors will have some sympathy in this situation. Perhaps you could reach an agreement to pay the amount you owe over a longer period of time?
Option 2 – Find alternative funding options
If your attempts to negotiate have been unsuccessful, there may be alternative funding options you can use to pay your debts. In some cases, the company might have tangible assets on the balance sheets, or due invoices, that can be used to generate the money you need. Invoice financing has become an increasingly popular method of improving cash-flow for SMEs.
Another option could be to refinance the assets you have. Typically, this kind of loan is used for urgent borrowing requirements such as settling unpaid tax liabilities. The point is that there are a number of finance options available that could provide the essential assistance you need.
Option 3 – Company Voluntary Arrangement (CVA)
If the company is still viable, you could consider entering into a company voluntary arrangement (CVA). A CVA is a formal repayment plan that once agreed with your creditors, will give you more time (up to five years) to pay. Entering into a CVA allows you to keep trading, and as long as you keep up with the repayments, the CVA will protect you from further creditor pressure or harassment.
Option 4 – Creditors’ Voluntary Liquidation (CVL)
If you think the extent of your cashflow problems are such that the business is simply not viable anymore, you may consider a creditors’ voluntary liquidation (CVL). In this case, the business will cease trading and an insolvency practitioner will be appointed to raise money to repay your creditors by selling off company assets. Once the company’s assets have been sold, it will be struck off the Companies Register and will cease to exist.
How can we help?
If you’re experiencing constant creditor pressure as a result of cash-flow issues, we can help you assess your situation and explore the potential solutions available. We can negotiate with HMRC on your behalf and look more closely at alternative funding options. For a free, no-obligation consultation, please contact us today.