Refused credit by suppliers: what should my business do?

Possible reasons include overdue invoices, a reduced credit limit, limited trading history or concerns in your business credit report. The supplier may also have changed its own credit policy. Ask its credit-control team for the specific reason rather than assuming every refusal means your business has failed.

Establish whether this is a rejected application, a temporary stop on an existing account or a permanent withdrawal of payment terms. Ask which credit-reference agency was used, where relevant, and check the report for incorrect company details or payment information. Challenge inaccuracies with supporting evidence; correcting a record does not guarantee approval.

Find out exactly what must happen before deliveries resume, then test whether that proposal is affordable. Confirm the position in writing so purchasing staff do not place orders on outdated terms.

• Reconcile the supplier statement against invoices, credits and payments.
• Separate genuinely disputed charges from accepted arrears.
• List outstanding customer orders that depend on the supplier.
• Ask whether smaller deliveries, a reduced limit or part-payment could be considered.
• Prepare a short-term cash forecast covering wages, tax, rent and other essential commitments.

Do not promise payment dates based on uncertain customer receipts. Explain what is available now and what evidence supports later payments. A credible proposal is more useful than a repayment schedule the business cannot maintain.

Paying upfront brings the cash outflow forward, even if the purchase price is unchanged. Rework the forecast using the new payment date and the date your customer is realistically expected to pay.

Illustration: materials cost £8,000 and the customer pays £12,000 after delivery. Under 30-day supplier terms, the customer’s payment might previously have arrived before the supplier bill fell due. If the supplier now requires payment before dispatch, the business needs £8,000 earlier, plus money for wages and delivery. The £4,000 difference between sale and materials is not spare cash: other costs still need paying.

Review each affected order. A busy order book can worsen the shortage where every new sale requires cash the company does not have. Our cash-flow problems guide explains the wider assessment.

You can ask, but neither option is guaranteed. Discuss a lower credit limit, staged deliveries or payment for new orders alongside an affordable arrears arrangement. Ask when the supplier would review the restriction and what evidence it needs.

Compare alternative suppliers on total cost, quality, lead times and payment terms. Switching does not remove the original debt. Borrowing to pay upfront is only useful if the resulting orders generate enough cash to cover operating costs and repayments. Before giving a personal guarantee, obtain advice on its scope and your personal exposure.

No. Refused credit is a warning sign to investigate, not an insolvency test by itself. The more serious question is whether the company can pay debts as they fall due and whether its liabilities exceed its assets. Read how to assess company insolvency.

If several suppliers have stopped deliveries, wages or tax are overdue, or new deposits are needed to finish old orders, get advice promptly. Where insolvency arises, directors must consider creditors’ interests. Do not pay connected parties, transfer assets or take commitments the company cannot meet without appropriate advice.

A review should distinguish a temporary funding gap from trading that loses money. A viable business may benefit from changes to purchasing, pricing, collections or creditor arrangements. If the figures do not support recovery, discuss formal options rather than simply seeking another credit account.

Prepare supplier statements, the refusal notice, current bank balance, expected receipts, outstanding orders and any personal guarantees. Call 01246 912052 or complete the online enquiry form for an initial discussion with Business Insolvency Helpline. Mention any threatened legal action or imminent delivery deadline at the outset.