I cannot afford to pay suppliers – what are my options?

Are you struggling to pay your suppliers?

One of the first things for directors to check is if the business debts have personal guarantees attached to the financial agreement.

If any PG is signed then the business debts could be chased as personal debts to the directors if the company is struggling to make repayments.

Many other businesses have been in the same position as you and have broken free from the difficulty of paying suppliers.

You can be assured that there are ways that you can escape this feeling of stress!

Read on to find out all the information you need to be fuelled with when struggling to pay your suppliers.

What happens if I can’t afford to pay suppliers?

If you cannot afford to pay suppliers you might well be in a state of stress and frustration.

With the calls and emails from creditors stacking up, it is likely that your exasperation is also on the rise.

If you have not been making any payments, creditors can make choices that can ultimately terminate your business.

You should be assured that the termination of your business will be the last scenario that can occur, however, you should still be aware of the many consequences of not paying your suppliers.

If you are struggling to pay, you can contact a free confidential advice service.

What are the consequences?

You should find out whether your company is insolvent from a licensed insolvency practitioner, depending on the result, this will determine the outcome of your consequences.

The consequences of not paying your suppliers will begin with your creditor contacting you with final demand letters and phone calls for a return of payment.

The contact from your creditors will begin with simple reminders, eventually ending in regular demands, threats, and hassle.

The creditor, if they feel it is necessary to, can make a 21-day statutory demand for a debt that is £750 or higher. Failing to co-operate and pay the debt can end up with further consequences that are much more serious. This would be the elimination of your business.

Is the business viable for the long term?

Speaking to licensed insolvency practitioners will show you whether your company can be able to be restructured or if you will need a business rescue with insolvency processes.

One insolvency method is voluntary liquidation. This insolvency process will include the funds from the business assets to pay back the supplier.

The majority of businesses that have partaken in wrongful trading or fraudulent trading will attempt to restructure their business through an IVA (individual voluntary arrangement).

Fraudulent trading is very serious and can come with many consequences. After you avoid paying company liabilities, you may have to sell company assets as your company can go into liquidation.

How do I tell my suppliers I cannot pay?

Many people hide in the dark when they cannot afford to pay suppliers as they believe it will just get brushed past and forgotten.

You should understand that this will not be the case.

When you are struggling to pay back your supplier you should always keep your creditor informed in your situation as they should attempt to understand and you can arrange a payment solution together.

Informing your debtor of your current situation that is forcing you to be unable to pay, can make the situation much easier for you. Without a doubt, the debtor would prefer to help you, than be ignored as this can make them add on additional costs.

You can contact your supplier through the same management team or business owner that contacted you.

I cannot afford to pay suppliers what are my options now?

Everyone has their own reasons as to why they can not pay back their company’s suppliers, whether that is a lower month of sales figures or your company is suffering from cash flow problems.

Formal Payment Arrangements

A company voluntary arrangement is a legally-binding payment plan.

A company voluntary arrangement is a good solution to choose when the business debt is only short-term and can be seen as viable in the future.

This method will consist of an affordable monthly payment plan that the licensed insolvency practitioner will help you decide upon with.

You can reach alternative payment arrangements this way!

Business Funding

Having no money to pay your suppliers will make you have no materials, consequently leading to cash flow problems and the businesses gradually going into liquidation.

If you source a business finance option, it can eventually help you to trade with other companies. This way, you will not be involved in wrongful or fraudulent trading.

Business funding will help you massively with slow-paying clients.

Business Termination

A business termination option, also known as the creditors voluntary liquidation, will be the option to choose when your business has been classified as non-viable by the licensed insolvency practitioner.

Should I cease trading?

If your company is in too much debt and the creditor pressure is exasperating to the point of further decline, the company directors should take a stance to stop trading.

The company suppliers would be promoting wrongful trading if they were to not stop trading with your business as your cash flow is likely to be stuck at a point of decline.

Final Thoughts

With creditor pressure, wrongful trading, and severe debt being increasingly popular, learning about how to deal with paying back company suppliers can be difficult.

This guide should have shown you exactly what you need to do!

If you need any further support, you can reach completely free professional advice from many different companies.