How to talk to your bank and creditors when cash is tight

Written By Alan Ball

24 Oct 2026 · @Alan Ball

Silence is the most expensive option

When cash is tight, the costliest thing you can do is say nothing. Banks and creditors can usually cope with bad news. What they cannot cope with is surprise.

A missed payment with no warning damages trust that took years to build. It also tends to trigger the very action you fear most: a frozen facility, a stop on supplies, a court claim.

The earlier you talk, the more options you keep. A business that calls its bank before a covenant breach is negotiating; one that calls after the account has been frozen is pleading. In my book, Planning a Sustainable Turnaround, I treat honest, planned communication with creditors and banks as one of the foundations of any recovery. This article puts that into practice.

Know your numbers before you pick up the phone

You cannot have a credible conversation about money without credible numbers. Before you call anyone, prepare three things.

  1. A 13-week cash flow forecast. Week by week: money in, money out, closing balance. It shows when the pinch comes, how deep it goes and how long it lasts. Write down your assumptions, because a lender will test every one.

  2. A complete list of who you owe. Every creditor, the amount, how overdue it is, any security they hold and what they can do if unpaid. Include HMRC, the landlord, asset finance, credit cards and any personal guarantees.

  3. A one-page explanation. What went wrong, why, and what you are already doing about it.

That third point matters more than most owners expect. In Planning a Sustainable Turnaround I argue that recovery starts with accepting the business is in trouble and identifying the real reason why. Creditors will ask the same question. A one-off shock, such as a lost customer or a bad debt, calls for a different plan from a structural problem like margins that no longer cover overheads.

Work out who can stop you trading

Not every creditor carries the same weight. Rank them by what they can do to the business, not by who shouts loudest.

Creditor. ‍ What they can do if unpaid

Bank or secured lender Withdraw the overdraft, demand repayment, enforce its security

HMRC Add penalties and interest, send enforcement agents, petition to wind up the company

Landlord. Take rent from your customers' payments or seize goods, or forfeit the lease

Asset finance company Repossess the equipment you rely on

Critical suppliers Stop supplying, switch you to pro-forma, cut your credit limit

Other trade creditors Issue a court claim or statutory demand

Wages and payroll taxes sit near the top too: if your people stop turning up, nothing else matters. The aim is not to pay the biggest debts first. It is to protect the relationships that keep the doors open while you fix the underlying problem.

Talking to your bank

Your bank wants three things: no surprises, a credible plan, and confidence that management is in control. Give it all three before it has to ask.

Go early, and go in person. Contact your relationship manager before the covenant test, the overdraft renewal or the missed repayment, not after. Ask for a meeting and send your forecast, latest management accounts and one-page explanation ahead of it.

Make a specific, time-limited ask. A bank can say yes to a request backed by numbers. It cannot say yes to "we need some help". Typical asks include:

  • a temporary increase in the overdraft for a set number of weeks

  • a capital repayment holiday, paying interest only for a few months

  • a waiver or reset of a covenant you expect to breach

  • extending a loan's term to reduce the monthly payment

Know your facility letter. Read it before the meeting. Understand which covenants apply, when they are tested, what information you must supply and what counts as a default. If you expect a breach, say so before the test date; a waiver agreed in advance is far easier than one requested afterwards.

If you are moved to a specialist team. Many banks pass struggling customers to a business support or restructuring unit. Its job is to protect the bank's position, so expect closer scrutiny, possible fees or repricing, and sometimes a request for an independent business review at your cost. Co-operate fully, ask for the process and timetable in writing, and get your own adviser alongside you.

Watch your personal guarantees. If you have guaranteed the company's borrowing, your own home and savings may be at stake. Take independent advice before you sign any new guarantee or give additional security.

Know where you stand if things go wrong

Do not assume an industry code protects you. The Lending Standards Board, which oversaw voluntary standards on how lenders treat small businesses in financial difficulty, closed on 31 October 2025. Lenders now rely on their own internal policies, so your facility letter and the bank's own complaints process are what count.

If you believe you have been treated unfairly, complain to the bank first. If it has not resolved matters within eight weeks, or you disagree with its final response, the Financial Ombudsman Service may be able to help. It can hear complaints from:

  • micro-enterprises: fewer than 10 staff, and turnover or balance sheet of no more than €2 million

  • small businesses: turnover under £6.5 million, and either a balance sheet under £5 million or fewer than 50 staff

  • personal guarantors of loans to businesses they are involved in

The service is free, but it is a last resort. A well-prepared conversation at the start is worth far more than a complaint at the end.

Talking to HMRC

HMRC would rather be paid over time than not at all, but only if you engage before enforcement starts. Its payment plans, known as Time to Pay arrangements, are routine; ignoring the brown envelopes is what turns a tax debt into a crisis.

Contact HMRC as soon as you know you cannot pay, ideally before the due date. Some smaller debts can be spread online through GOV.UK, which checks your eligibility as you go. Larger or longer plans are agreed by phone.

Expect to be asked:

  • whether you can pay in full, and if not, how much you can pay each month

  • what other taxes you have coming up

  • what the company earns and spends

  • what savings, investments or assets it has

Your 13-week forecast answers most of these. HMRC will also expect the company to cut the debt as far as it can before a plan starts, for example by selling surplus stock or vehicles. It may ask directors to put in personal funds or arrange other lending.

Keep the plan alive. Interest keeps running on what you owe. File every return on time and pay new liabilities as they fall due, because missing an instalment or building fresh arrears can bring the arrangement to an end.

Treat VAT and PAYE with particular care. That money was collected on HMRC's behalf, from your customers and your employees, and HMRC tends to take a firmer line on it.

If you do not engage, HMRC can use debt collectors, take and sell goods, take money from your bank account, go to court, and for business taxes, close the company down. It will warn you first. Use that warning.

Talking to suppliers, landlords and other creditors

Most creditors will accept a slower payment they can rely on over a faster one they cannot. Your job is to offer them something reliable.

Critical suppliers first. Call before the payment date, explain briefly and propose a plan. A structure that often works: pay for new deliveries on normal terms, or pro-forma if necessary, and clear the arrears in fixed weekly or monthly instalments. Supplies keep flowing while the old balance comes down.

Your landlord. Most landlords would rather have a paying tenant than an empty unit. Options to raise include paying monthly instead of quarterly, deferring part of the rent for a few months, or a temporary reduction in return for something the landlord values, such as a longer commitment.

Asset finance and leasing. Do not simply stop paying, because the equipment can be taken back. Ask instead for a short payment holiday, or for the agreement to be extended to bring the monthly cost down.

Everyone else. Write to smaller creditors with the same clear message and a fair, consistent offer. Consistency matters: if the company may be insolvent, paying one creditor ahead of the others can be challenged later.

Remember the other side of the ledger. Money owed to you is often the quickest source of cash. Chase overdue customers firmly and politely, and accept part-payments where full payment is not possible.

What to say, and what not to say

Credibility is the currency you spend in every one of these conversations. Each promise kept adds to it; each one broken drains it faster than any missed payment. That is why Planning a Sustainable Turnaround treats communication as part of the recovery plan itself, not an afterthought.

A few rules hold good with every creditor:

  • Tell the truth, including the uncomfortable parts. Creditors find out eventually, and a half-truth discovered later ends the goodwill.

  • Promise less than you think you can deliver. A plan you beat builds trust; one you miss destroys it.

  • Warn before you miss. If a commitment is slipping, say so before the date, not after.

  • Keep one point of contact for each creditor, and update them even when there is no news.

  • Confirm every agreement in writing within a day: amounts, dates and what happens if things change.

  • Stay calm and professional. The person on the other end is doing their job, and may be your best ally inside their organisation.

The difference is often in the wording. The figures below are illustrations only.

Instead of "We'll have it to you by Friday" (when you are not sure)

Try "I can pay £2,000 on Friday and the balance by the 30th. I'll confirm on Thursday either way."

Instead of "Business is a bit slow at the moment"

Try. "Sales are 20% below forecast since we lost our largest customer in June. Here is what we are doing about it."

Instead of "We just need a bit more time"

Try. "We need eight weeks. This forecast shows how the position recovers over that period."

Instead of Saying nothing

Try. "I wanted you to hear this from me before the payment date."

When it becomes serious: know your duties as a director

If the company cannot pay its debts as they fall due, or owes more than it owns, the rules change and directors need advice quickly. Good intentions are not a defence.

  • Creditors come into focus. Once a company is insolvent, or insolvency is probable, directors must give proper weight to creditors' interests, not just shareholders'. The Supreme Court confirmed this in BTI v Sequana (2022).

  • Wrongful trading. A director who knew, or ought to have concluded, that insolvent liquidation or administration could not reasonably be avoided, and then failed to take every step to minimise creditors' losses, can be ordered to contribute personally (Insolvency Act 1986, section 214).

  • Preferences. Paying one creditor so that it ends up better off than the rest can be reversed later. This catches directors who repay their own loans, or a bank debt they have personally guaranteed, while others go unpaid (section 239).

The practical protection is a good paper trail and early advice. Hold regular board meetings, minute the decisions and the figures they relied on, and keep the forecast current. Avoid taking deposits or new credit you cannot see a way to honour.

Speak to a licensed insolvency practitioner sooner rather than later. Taking that advice is not the same as giving up: the formal rescue tools, such as a company voluntary arrangement, a moratorium or a restructuring plan, work best when they are used early.

This is general information, not legal advice. Every situation turns on its own facts.

Get a critical friend in your corner

These conversations are hard to have alone, and it is hard to see your own business clearly while you are fighting to keep it going. An independent adviser changes the dynamic.

A good adviser brings a second pair of eyes on the numbers and credibility with lenders who have seen too many optimistic forecasts. Above all, they tell you what you need to hear rather than what you want to hear. That is what a critical friend is: firmly on your side, but honest enough to challenge.

It is the thinking behind Critical Friend Advisors Ltd. We work with owners and directors to build the numbers, test the plan and prepare for the conversations that follow, using the approach set out in Planning a Sustainable Turnaround.

Whoever you work with, there is free help too:

  • Business Debtline, a charity service run by the Money Advice Trust, gives free, confidential debt advice to self-employed people and small businesses in England, Wales and Scotland.

  • Your accountant can usually help with the forecast and with HMRC.

  • A licensed insolvency practitioner can explain your options; many offer a free first consultation.

Your checklist

Cash pressure is rarely fatal on its own. What sinks businesses is losing the confidence of the people they owe. Talk early, talk honestly, and bring a plan.

  • Build a 13-week cash flow forecast and write down the assumptions

  • List every creditor, what you owe and what they can do if unpaid

  • Write a one-page explanation of what went wrong and what you are doing about it

  • Decide your specific, time-limited ask for each key creditor

  • Contact the bank and HMRC before any payment is missed

  • Confirm every agreement in writing

  • Keep every promise, and warn early if one is slipping

  • Take advice straight away if the company may be insolvent

Sources

Alan Ball
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