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When a large customer stops paying or enters bankruptcy, the first moves are usually to confirm exactly what they owe, stop extending new credit on that account, and build a short-term cash forecast for payroll and vendors. Bridge options may include a line of credit draw, short-term working capital, or factoring on invoices to other customers — not on the bankrupt account. When you're ready, one inquiry goes to our trusted financing partner.
Confirm what is owed and pause new credit
Pull aging reports, open purchase orders, and any retainage or credit memos tied to the customer. Match invoice numbers to delivery or acceptance records your team already uses. Consider pausing new shipments on open account to that customer until balances are reconciled — whether the issue is slow pay, dispute, or insolvency.
If the customer is in bankruptcy
The U.S. Courts chapter 7 bankruptcy basics page says that in a typical no-asset case creditors don't need to file proofs of claim because there will be no distribution, and that when a case has assets, unsecured creditors must file their claims by a court deadline. The chapter 11 bankruptcy basics page says a creditor whose claim is not scheduled, or is scheduled as disputed, contingent, or unliquidated, must file a proof of claim. Recovery amounts and timing depend on the case — talk with a bankruptcy attorney about deadlines and documents for your situation.
Build a short-term cash forecast
List payroll, rent, key vendors, and loan payments due in the next few weeks alongside expected collections from other customers. Use our cash gap calculator with your own numbers — illustrative math only until you know which bridge fits.
Bridge options to compare
Paths differ by whether you already have a revolver, whether other invoices are factorable, and how long the gap may last.
Line of credit draw
Speed: Depends on an existing line and its draw limits
Cost shape: Interest and fees on the balance you use for the weeks you use it
You have open capacity and expect other customers to pay within a defined window
Short-term working capital
Speed: Varies by product
Cost shape: Fixed schedule on a set amount; compare total repayment to the gap you need to cover
You need a defined lump sum for payroll, vendors, or rent while you sort out the receivable
Invoice factoring on other customers
Speed: Often tied to verification of each invoice and customer credit
Cost shape: Fees tied to how long invoices stay open — compare total dollars, not advance rate alone
You still have creditworthy B2B customers with open invoices unrelated to the troubled account
Pause shipments and collect documentation
Speed: As fast as your team can reconcile aging and stop new exposure
Cost shape: No financing cost — may affect future sales with that account
The customer is slow-paying but not yet in bankruptcy and you need to limit further loss
A line of credit or working capital inquiry may fit a defined gap. If a prior line was not renewed, see business line of credit not renewed.
Invoice factoring and the troubled customer
Factoring usually depends on the creditworthiness of the account debtor on each invoice. Invoices owed by a customer in bankruptcy or serious default are generally not financeable. Invoices to other creditworthy customers may still be reviewed on their own — see invoice factoring for how B2B receivables fit a file.
Daily-debit products and cash gaps
A merchant cash advance often debits a fixed amount on a schedule tied to sales — when a major customer stops paying, that debit may not flex with incoming cash. Compare total repayment to the weeks you need to bridge before you sign.
What to have ready before you inquire
- Aging detail for the affected customer and your top ten accounts receivable overall.
- Recent business bank statements and a simple week-by-week cash forecast.
- Bankruptcy case number or court notice, if the customer filed.
- Open invoices you might factor from other customers, with customer names and amounts.
Common questions
- Should I keep shipping to a customer who stopped paying?
- Pause new credit and confirm open balances before extending more product or labor. Document invoices, delivery records, and any written payment promises — an attorney can advise on your contract rights.
- Can I factor invoices owed by a customer in bankruptcy?
- Factors usually underwrite the account debtor’s credit. Invoices tied to a bankrupt or insolvent customer are often not financeable; invoices to other creditworthy customers may still be reviewed on their own merits.
- What is a proof of claim in bankruptcy?
- Under chapter 11, a creditor whose claim is not scheduled, or is scheduled as disputed, contingent, or unliquidated, must file a proof of claim. Under chapter 7, the U.S. Courts chapter 7 bankruptcy basics page says that in a typical no-asset case creditors don't need to file proofs of claim because there will be no distribution, and that when a case has assets, unsecured creditors must file their claims by a court deadline. Recovery amounts and timing depend on the case; a bankruptcy attorney can advise on deadlines.
- Is a merchant cash advance a good bridge when a major customer stops paying?
- Daily- or weekly-debit products can pull fixed amounts regardless of incoming cash. Compare how a set debit fits your forecast before you stack it on payroll and vendor obligations — see our merchant cash advance overview for how those products are structured.
- Will LoanHelp run a credit check when I submit an inquiry?
- LoanHelp does not perform a credit check when you submit an inquiry. Our trusted financing partner may request authorization for a credit inquiry later if you choose to move forward.