How we helped a bed manufacturer spring back into business
Following the national lockdown in March 2020 a large furniture retail brand wrote to all of its suppliers advising that whilst their business was in temporary shutdown they were unable to make any payments. One of their suppliers was our client, a bed manufacturer who was owed a significant six figure sum, 60% of which was overdue for payment. Without this income, our client could not continue to trade and therefore they regretfully started to look at placing the business into a formal liquidation process. Given the company’s survival was dependent on the recovery of this one debt, liquidation experts referred the company on to us to see if we could assist.
In this instance, our research showed us that the investment company behind the retail furniture brand had recently put the company up for sale. We knew that we had to make our client’s debt a priority in the debtor’s mind, so we looked at action that would potentially unsettle the sale of the business and gain the attention we needed. So we wrote to the furniture retailer advising them that whilst we sympathised with their position, they had contractual obligations to honour in three key areas:
Under the terms of trading with our client if any invoice was not paid on time, our client had the right to cancel any rebate or discount that would normally be applied. This would have been worth a considerable six figure sum to the retailer.
We reminded them that our client had a right to apply late payment charges and compensation, which at that time totalled over £5000.
Finally and crucially, we also reminded them that under our client’s terms of trading it specifically stated that they might consider a customer insolvent if they do not pay their invoices on time.
This final term falls in line with the common rules of insolvency and therefore we advised the retailer that unless they repaid their overdue debt immediately, we would present a winding up petition in the Chancery Division of the Business & Property Court in Manchester.
The results we secured
Our action had the desired effect and we were soon negotiating with the CEO of the retailer. Open, honest discussions took place between us. They explained that any payments would have to come from fixed cash reserves which would make shareholders very nervous and submitted an initial offer of less than a quarter of the monies owing which we rejected.
Instead we recommended that it would be more beneficial to both parties if they made an immediate payment of the overdue 60% of the total six-figures owing plus the late payment and interest charges. Receiving this larger sum obviously benefitted our client, but it also benefitted the retailer as it took the immediate threat of insolvency proceedings off the table giving them some breathing space. In return we agreed a reduced five figure offer per week to pay off the remaining balance. This was agreed and maintained and the debt was settled in full.
In quick conclusion
Having the skills and experience to take the appropriate action at the right time ensured that our client recovered the funds it needed to continue to trade and its retail client was able to complete a sale of its business. It demonstrates that there is sometimes a need to consider forbearance, to put yourself in the debtor’s shoes and consider their outcomes in line with your own clients to get a resolution for all. We drew down on over 30 years of debt recovery experience to give this company a clear, compliant and efficient recovery solution.