Why talking early matters
Most creditors don’t want to take legal action. It costs them money and time, and it often recovers less than a negotiated plan. What pushes them to issue a statutory demand or hand the debt to a collection agency is usually silence: missed payments with no explanation and calls that aren’t returned.
The owner who calls first, explains, and offers something specific is in a much stronger position than the one who waits.
Before you pick up the phone
Prepare three things:
- A list of every creditor: name, amount, how overdue, what they’ve said, and whether they have security or a personal guarantee.
- A 13-week cash flow forecast, so any plan you offer is one you can keep.
- A short, honest explanation of what’s happened, two or three sentences, no drama.
Who to call first
| Priority | Creditor | Why |
|---|---|---|
| 1 | Anyone who has served a statutory demand | The 15 working day clock is running |
| 2 | IRD | Extensive collection powers, including deduction notices and liquidation |
| 3 | Secured lenders | They can enforce security, including over property |
| 4 | Landlord | Can end the lease and lock you out in some circumstances |
| 5 | Critical suppliers | Losing them stops the business |
| 6 | Other trade creditors | Important, but usually more flexible |
What to say
A simple structure works with almost every creditor:
- Acknowledge the debt. “We owe you $18,400 and it’s overdue. I’m sorry for the delay.”
- Explain briefly. “A major customer paid three months late and we’ve had a slow winter.”
- Offer a specific plan. “We can pay $1,500 a fortnight starting on the 15th, and we’re arranging finance that we expect to clear the balance within six weeks.”
- Ask for what you need. “Can you hold the account open on cash terms while we do that?”
- Confirm in writing. “I’ll email you this plan today. Could you reply to confirm?”
Keep your tone calm and factual. You’re a business owner working through a problem, not a defendant.
Creditor by creditor
IRD
Inland Revenue’s consistent advice is to contact them early. You can request an instalment arrangement in myIR. For larger debts, IRD may ask for a cash flow forecast. Keep current returns filed and paid while you’re negotiating the arrears; that’s what IRD watches most closely.
Landlords
Commercial landlords often prefer a tenant who pays late to an empty building. A short rent deferral or a payment plan for arrears is common. Check your lease for default clauses and notice requirements.
Trade suppliers
Suppliers care about two things: getting paid, and whether you’ll keep buying. Offer to move to cash-on-delivery for new orders while you pay down the old balance. This protects them from growing exposure and keeps stock coming.
Finance companies and banks
Talk to them before you miss a payment, not after. Many have hardship processes. If they hold security over property, understand your position, because enforcement is a serious step.
Collection agencies
If a debt has gone to a collection agency, you can still negotiate. Ask for the full breakdown of what’s owed, including any collection costs claimed, and check them against your agreement with the original creditor.
Get it in writing
A phone agreement can be forgotten or disputed. After every conversation, send a short email:
Thanks for your time today. As discussed, we’ll pay $1,500 a fortnight from 15 October until the balance of $18,400 is cleared, and you’ll keep our account open on cash-on-delivery terms. Please reply to confirm.
If you’re negotiating a settlement of a statutory demand, the written agreement must make clear that the creditor accepts it in satisfaction of the demand. Ideally your lawyer checks the wording.
When a plan isn’t enough
Sometimes there are simply too many creditors, too much debt, and not enough weekly cash to satisfy everyone. That’s where money in changes the conversation. A single consolidation or complete refinance can pay creditors in full at settlement, which ends the negotiations altogether.
Creditors also respond to credibility. Telling them “we’re arranging property-secured finance and expect to settle your account in full within four weeks” is far more persuasive than a request for more time, and often buys the time you need to get it done.
Watch out for preferences
If a company is insolvent and later goes into liquidation, a liquidator can sometimes claw back payments made to certain creditors in the period before liquidation, where those payments gave them more than they would otherwise have received. This is a reason to take advice if you’re unsure whether the company is solvent, not a reason to stop paying bills. A loan that pays everyone in full sidesteps the issue.
Next step
If you’ve done the calls and the numbers still don’t work, start an enquiry. A lending specialist can tell you quickly whether funding could clear the pressure.