Creditor holding letter template
A holding letter buys a short, honest pause with a pressing creditor. It does three things: states the position plainly instead of going quiet, commits to a specific date (ideally within 14 days) when you will come back with a concrete proposal, and asks the creditor to hold further action until then. What it must never do is promise payment you cannot be certain of, favour one creditor over the others, or pretend the company is fine when it is not; if the company later enters liquidation, false comfort and preferential payments can both be held against the directors. Creditors escalate fastest against silence, so an honest letter with a date usually lands better than either silence or a broken promise. This is information, not advice: if the company cannot pay its debts as they fall due, speak to a Licensed Insolvency Practitioner before you send anything.
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The letter
[Company name]
[Registered office address]
Company number: [number]
[Date]
[Creditor name]
[Creditor address]
Your reference: [invoice / account number]
Dear [Name],
Re: account [number], balance [amount]
I am writing about the balance of [amount] on our account, of which [amount] is overdue. I would rather tell you the position plainly than go quiet.
The company is currently dealing with [one factual sentence: a short-term cash shortfall following X / the loss of a customer / a delayed receipt]. We are taking advice on the company's position and expect to be able to put a specific proposal to you by [date, ideally within 14 days].
Until then, I am asking you to hold any further action on the account. I will contact you on or before [same date] whether or not the position has improved. If anything material changes before then, I will tell you.
I appreciate this is not what you want to read, and I am grateful for your patience. You can reach me directly on [phone] or [email].
Yours sincerely,
[Name]
Director, [Company name]
What not to promise
- Payment in full by a fixed date, unless you are certain the money will be there. A broken promise is worse than a slower truth.
- Priority for whoever presses hardest. If the company later enters liquidation, payments that favoured one creditor can be challenged as preferences.
- A rosy picture. If the company is insolvent, a letter claiming otherwise can be used against the directors later.
- New orders on credit you already doubt the company can pay for.
Work out how much time you actually have
Before promising a date, know your runway: the cash flow runway calculator shows how many weeks of cash the company has at its current burn. If the creditor has already escalated to a statutory demand or a winding-up petition, a holding letter is no longer the right tool; take advice the same day. See also dealing with creditor pressure.
Holding letters: common questions
Will a holding letter stop a creditor taking action?
It cannot force them to wait, but it often works for a short period because it gives the creditor something concrete: an honest statement of the position and a specific date you will come back with a proposal. Creditors escalate fastest when they hear nothing. A holding letter is a bridge to a real proposal, not a substitute for one.
Is it safe to promise a payment date to get them off my back?
Only if you are certain the money will be there. A missed promise destroys the goodwill the letter created and usually accelerates enforcement. If the company is insolvent, painting a false picture of its position in writing can also be held against the directors later. Promise contact by a date, not payment by a date, unless payment is certain.
Can I just pay the creditor who is shouting loudest?
Be careful. If the company later enters liquidation, payments that put one creditor in a better position than the others in the run-up can be challenged as preferences and clawed back. If you cannot pay everyone as debts fall due, the company may be insolvent: check with the insolvency test tool and take advice before choosing who gets paid.
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