2 min read
Definition
The priority of payments (or "waterfall") sets who gets paid first when an insolvent company is wound up: broadly, fixed-charge secured creditors, then insolvency costs, preferential creditors (including some HMRC and employee claims), floating-charge holders, unsecured creditors, and finally shareholders.
In plain terms
It explains why unsecured suppliers often recover pennies while a first-charge lender is repaid in full. Your position in the queue is set before insolvency, by the security you hold.
Why it matters for your company
As a supplier, understanding the waterfall drives your credit-control and retention-of-title decisions. As a borrower, it explains why secured borrowing is cheaper. See payment waterfall.
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