Short answer: Suppliers usually escalate from an account hold to cash on delivery, then a letter of demand, a statutory demand or a court claim. Pay wages, super and tax first, because directors can be personally liable for some of those, then critical suppliers. Call before due dates with a dated plan, or clear creditors in one hit with a loan.
What a supplier can actually do, and in what order
Most supplier disputes follow a ladder. Few suppliers want to climb it, because litigation costs them time and money. But each rung narrows your options, so it helps to know where you are standing.
| Step | What it means for you |
|---|---|
| Account on hold | No new orders until the overdue balance is cleared or a plan is agreed. |
| Cash on delivery | Credit terms withdrawn. You pay before or at delivery. See what to do when a supplier puts you on COD. |
| Retention of title | If your supply agreement contains the clause, the supplier keeps ownership of unpaid goods and may try to take them back. |
| PPSR registration | The supplier registers its security interest in the goods on the Personal Property Securities Register to protect its position if you become insolvent. |
| Letter of demand | A formal written demand with a deadline, often the last step before legal action. |
| Statutory demand | A formal Corporations Act demand with a 21-day clock. Read our statutory demand guide the day one arrives. |
| Court claim | A civil claim for the debt plus costs. A judgment can lead to enforcement. |
On retention of title, the Personal Property Securities Register site explains that such an arrangement creates a security interest in the goods, and that a supplier who doesn’t register is an unsecured creditor with far less chance of recovery if the customer becomes insolvent (PPSR). So a registration on your stock is a sign the supplier is protecting itself.
Who to pay first when you can’t pay everyone
When cash is short, treat creditors as three groups rather than one pile. The order matters because some debts carry personal consequences and some suppliers are the business.
- Wages, super and tax first. Directors can be personally liable for a company’s unpaid PAYG withholding, GST and super guarantee charge if the company doesn’t pay by the due date. The ATO can recover a director penalty 21 days after a director penalty notice is issued, and remission options narrow if the amounts were reported late or never reported (ATO). Read our guide to the director penalty notice and catching up on unpaid wages and super.
- Critical suppliers next. The ones you can’t trade without in the next 30 days: your stock source, your key subcontractor, your software or the supplier that holds retention of title over goods on your shelves.
- Everyone else, on a plan. Marketing, professional fees, trade accounts you can replace. These are the creditors to negotiate with, not ignore.
If you’re unsure whether a particular debt falls in group one, ask your accountant which amounts have been reported to the ATO and which haven’t, because that changes how much room you have.
That order isn’t a legal ranking of every debt, and it doesn’t mean ignoring small suppliers. It’s a way to protect yourself and the business when you can’t pay everyone this week. Write the list down with amounts, due dates and the consequence of each missed payment. The list often shows the problem is smaller than it felt.
How to negotiate with suppliers before they escalate
Suppliers hear excuses all day. What they rarely hear is a specific, dated plan from the customer, and it is the single most effective thing you can send.
- Call before the due date. A call before the invoice goes overdue lands very differently from a reply to a demand letter.
- Part-pay first. Pay something this week, even if it is a fraction. It proves you are serious and often resets the tone.
- Offer a dated plan. “$2,000 now, $1,500 on the 15th and 30th, cleared on this date.” Put it in an email and ask them to confirm.
- Keep paying on new orders. Pay on delivery for new supply while the old balance runs down. It shows the relationship is safe going forward.
- Be honest about the cause. A late customer, a seasonal dip or a one-off bill. Credible reasons help. Vague ones don’t.
- Keep every promise. One missed plan payment burns more trust than the original lateness did.
Don’t overpromise. A plan you can’t meet is the quickest route to a letter of demand.
Also ask each supplier one question: what do you need from me to keep trading? Some want a director’s signed acknowledgement of the debt, some want a direct debit, some just want a firm date. Knowing the price of peace turns an argument into a checklist, and it tells you which suppliers are close to escalating and which have room to wait. If a supplier has already moved you to cash on delivery, the plan can include a path back to credit terms once the old balance is cleared.
The one-repayment idea
When four or five suppliers are all overdue, the practical problem is the sheer volume of payments, phone calls and promises. Consolidating can simplify the lot: one lump sum clears the overdue accounts, and you are left with a single repayment to one lender.
The benefits are practical.
- Accounts reopen. Many suppliers restore credit terms or lift holds once the balance is cleared.
- Pressure drops. You deal with one repayment schedule rather than six conversations.
- You can ask for settlement discounts. Some suppliers will accept a faster payout of a debt for a small reduction. It is worth asking, but don’t count on it.
- Your focus returns to trading. Which is what pays the loan back.
Our page on business debt consolidation covers how that works. If the amounts are modest and you’ve traded for six months or more, unsecured business loans are assessed on turnover and bank statements, and some fund in as little as 2 hours after approval. If a past default is part of the story, bad credit business loans explains how that is considered.
When the number is too big: the equity route
If the overdue total runs to tens or hundreds of thousands, a cash-flow loan may not stretch far enough. This is where property equity comes in. Equity is the value of the property minus whatever loans are already registered on it, and lenders lend against a portion of it. How the loan will be repaid, the exit, carries equal weight.
A property-secured business loan can be written from $20,000 to $5M. It can fund in as little as 24 hours (the median across our book is 36). There are no financials or tax returns, because the file is assessed on the equity and the exit rather than your trading history. Past defaults and ATO debt are considered, not automatic knock-outs.
Take a small builder who owes five suppliers and a subcontractor while two progress claims sit unpaid by a client. That is an illustration, not a case study. Clearing the lot in one go gets accounts moving again, stops one demand from setting off the next, and lets the builder keep ordering materials while the claims are chased. Our urgent business loans page explains how both lanes work.
Negotiate, pay out, or go formal: how they compare
| Negotiate | Pay out with a loan | Formal options | |
|---|---|---|---|
| Best when | Debts are manageable and suppliers are willing | Business is viable but behind, and several creditors are pressing | Business cannot pay its debts as they fall due |
| Speed | Days to weeks | Property-secured in as little as 24 hours; cash-flow in as little as 2 hours after approval | Weeks to months |
| Upfront cost | Little or none | Loan costs and interest, so compare before signing | Professional fees |
| Effect on creditors | Plans and promises, kept or broken | Creditors paid in full | Creditors dealt with under a formal process |
| Main risk | One broken promise restarts the escalation | Adds a repayment you must be able to carry | Loss of control of the business |
| Who to see | Your accountant | A lender, after your accountant | A registered liquidator or insolvency lawyer |
Many owners combine the first two: negotiate with the small creditors and pay out the ones who won’t wait.
When a loan is the wrong answer
If the business cannot pay its debts as and when they fall due, you must get insolvency advice, and you should never borrow to keep trading while insolvent. ASIC says directors must consider whether the company can pay its debts when due before taking on new ones, and that the duty applies even if you are the only director and shareholder (ASIC).
The warning signs ASIC lists include overdue tax, super, wages, supplier or loan payments, relying on director loans or customer deposits to operate, and creditor demands or threats of legal action. These signs don’t always mean insolvency, but they should prompt a proper review of the numbers. Speak to a registered liquidator, lawyer or accountant, or call the Small Business Debt Helpline on 1800 413 828.
A loan is the right tool for a viable business with a timing problem. It’s the wrong tool if sales no longer cover costs, if new borrowing would only fund old invoices, or if the business has no realistic path to making the repayments.
Check what you could clear in one go
If your business is sound and the overdue list is the thing holding it back, the next step is finding out how much you could access. Our 60-second eligibility check tells you whether a property-secured or cash-flow loan fits your situation. It makes no credit enquiry and costs nothing. Bring the creditor list with amounts and dates, or call 1300 863 711 to talk it through before your next supplier call.
Frequently asked questions
What can a supplier do if I can’t pay an invoice?
Typically they put your account on hold, move you to cash on delivery, send a letter of demand, and, if the debt stays unpaid, issue a statutory demand or a court claim. If they hold a retention of title clause, they may also try to recover goods.
Which creditors should I pay first?
Start with obligations where directors can be personally liable, such as PAYG withholding, GST and super guarantee charge, plus wages. Then pay the suppliers you cannot trade without. Everything else can usually be put on a written, dated plan.
Can I use a business loan to pay several creditors at once?
Yes, many owners do. One loan can clear several overdue accounts and leave a single repayment. It only makes sense if the business is solvent and can carry that repayment. Get advice first if you are unsure.
Will paying a supplier part-way stop them taking action?
Not by itself, but a part-payment plus a dated plan in writing often buys time. Suppliers generally prefer a credible payment arrangement over chasing a debt through court, which costs them time and money too. Get any agreement confirmed by email, with dates and amounts.
What if I think my company is insolvent?
Get advice from a registered liquidator, lawyer or accountant before taking on new debt. ASIC notes that delaying action increases legal and personal risk for directors. Free support is available through the Small Business Debt Helpline on 1800 413 828.
Does it cost anything to apply?
No. There's no cost to apply or check your eligibility. All costs are set out in writing in your loan offer before you sign anything.
Will checking my eligibility affect my credit score?
No. Our 60-second eligibility check doesn't make a credit enquiry. A credit check is only done later, with your consent, if you decide to proceed.
