This week we are discussing Trade Creditor Pressure. So far in our series of blogs, we have covered the issues of:

Trade Creditor relationships are more complex and faster-moving in that:

  • The supply of their goods/services are often the lifeline of the business,
  • When this comes under pressure, the removal of the goods/services can be terminal to your business, and
  • There is the added pressure of treating fellow business owners fairly and the commerciality therein is paramount.

If a business faces a terminal decline, then it is imperative that the owner looks to control the overall situation.

A planned withdrawal is required. If left open-ended and the business owner merely works on the basis of ‘who shouts loudest’, the stress and pressure that will stem from this will ‘fry your head’ – a good old Northern Ireland phrase!

Essentially, Trade Creditor pressure is simply a case of balancing one of two things:

  1. If the business is to continue, managing that supplier relationship through a very difficult period, or
  2. 2. If the business condition is terminal, managing your way through to the end…trying to take some control here

In our article on Personal Guarantees, we refer to Creditors and the difficulties business owners sometimes face in terms of commercial decisions.

Very often, a trade creditor will use a PG to ‘lever’ the customer and or use it as a threat. This then becomes a whole new dynamic and very personal. You as an individual are under attack as well as the business

Despite all the pressure above, the business owner should be pragmatic and keep a clear head = IMPOSSIBLE!

To reiterate, all business debts can be stressful, but undoubtedly the trickiest to manage is Trade Creditor pressure.

When Bell & Company are appointed in such circumstances, we fully liaise with the business owner/client, so that we understand all the vagaries of the case and suppliers.

It can be better for us to get involved with the trade creditor to ensure the commercial position of the relationship is fully explained.

In other instances, the business owner may have a strong personal relationship with the creditor, and it would be more appropriate for them to deal with the issue.

Financial institutions, HMRC and other such creditors, do not understand the complexity of trade creditor relationships…. nor do they care. They work solely on a macro level, which isn’t always in the best interests of their stakeholders – but that’s another story!

We briefly mentioned above, the notion of ensuring the best outcome for fellow businessmen and women in tricky debt situations, as any debt-related issues will hit them hard as well.

We get that, but it must be about your survival first – then see what can be done from there.

As an aside – all businesses should adopt, as part of their Ts & Cs, a Romalpa clause provision. This clause secures ownership of the title of their goods to the vendor until they are paid for.

In the event of a business failure, they are still owned by the supplier.

In conclusion, Trade Creditor pressure is the true barometer of a business’s health. If times are difficult, the pressure increases.

If this is the case, we would implore you never to leave any decision process until it’s too late – you owe it to yourself.


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