Will creditors accept a repayment plan?

Creditors need a credible proposal

A plumbing company owes several suppliers after a large customer pays late. The owner offers everyone a monthly instalment and expects relief. One supplier asks for a forecast, another wants an upfront payment and a third does not respond. The owner is learning that a payment proposal needs to answer the creditor’s questions as well as solve the company’s immediate cash problem.

Show how the offer was calculated

Start with the money the business can make available after realistic operating costs and current obligations. Explain the source of any upfront payment. Separate an existing bank balance from funds that depend on a sale, loan or customer paying.

A proposal based on round numbers chosen to sound attractive is vulnerable at its first due date. Show how much can be paid in the ordinary case and what changes if trading is slower. Keep the forecast simple enough that another person can follow it.

Address the creditor’s actual concern

Ask whether the concern is the balance, the first payment date, repeated broken promises or uncertainty about ongoing supply. An accurate answer can be more useful than increasing an instalment the business cannot afford.

Provide a reconciled account showing payments and credits. Where part of the debt is disputed, describe that separately rather than making the offer appear to settle an issue unintentionally. Agree which information can be shared and avoid promising confidentiality that has not been discussed.

Distinguish agreement from an unanswered request

An informal offer does not become binding simply because it was emailed. Track acceptance, rejection and requests for changes for each creditor. Record the agreed dates, payment method and consequences of a missed instalment.

Formal restructuring plans have their own voting and binding rules. A practitioner should explain those rules for the relevant process. Do not tell a creditor that the majority has forced them into an ordinary private payment arrangement when that is not the legal position.

Source: ASIC — Small business restructuring and the restructuring plan

Plan for a refusal before it happens

Consider what the business can do if a major creditor will not agree. A revised payment source, a shorter review period or a different process may need assessment. Avoid using money allocated elsewhere to make an urgent side promise.

The useful test is whether the whole arrangement still works after each negotiation. Update the shared forecast as terms change. If satisfying one creditor makes every other payment impossible, the proposal needs wider review rather than another reassuring email.

Build the evidence for acceptance

Prepare a one-page offer showing the balance, payment dates and funding source.

Keep a response register so silence is not recorded as agreement.

Check the combined cost of accepted terms before sending a revised offer to anyone else.

Call CRP today about creditor negotiation and business debt support.

Source: business.gov.au — Prevent, manage and resolve disputes