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Operational creditors (OCs) face unique challenges and risks when it comes to extending credit to companies, especially startups. In cases of insolvency or bankruptcy, OCs may be treated at par with other creditors, regardless of their good standing and reputation with the debtor company. Banks and other financial creditors (FCs) will control & manage the affairs of defaulting Debtor, via a concept called CoC - Committee of Creditors. CoC will appoint / re-appoint / replace IP - Insolvency Professional, termed as IRP or RP. In fact, banks and other financial creditors (FCs) have priority in the repayment process, meanwhile OCs may be left waiting in line with the hope of receiving any leftover funds after the FCs have been paid off.

This can be a difficult and frustrating situation for operational creditors (OCs), especially if they have invested significant time and resources into building a relationship with the debtor company. In such cases, it's essential for OCs to carefully consider the creditworthiness of a potential debtor before extending a credit line and to have a strong, legally sound contract in place to protect their interests. This may include provisions for a lien on the debtor's assets or other safeguards to ensure that OCs are able to recover their funds in the event of bankruptcy or insolvency.

Startups can be particularly risky for OCs, as they often have a tendency to grow exponentially and take on more debt than they can handle. This can lead to financial difficulties and, in some cases, bankruptcy. It's crucial for startups to carefully manage their growth and assemble a competent team to avoid these problems. However, even with careful planning, mistakes can happen and startups may find themselves facing bankruptcy. In most cases, startups are funded by large investment firms, with the founders or CEO serving as the public face of the business without necessarily being the true owners. This can make it difficult to determine who is ultimately responsible for the company's actions and debts. Also, It is common for new businesses, particularly startups, to have few assets that they own outright. Instead, they may lease their office equipment and use software on a subscription or licensing basis. Additionally, even the company's assets may be in the possession of employees, particularly in the current remote work environment. This can make it difficult for creditors to secure their claims in the event of bankruptcy or insolvency, as there may be little in the way of tangible assets to seize. It is also possible that employees who are owed unpaid wages may seek protection from legal action through regulatory bodies or other means. 

In such cases, OCs may be left feeling helpless and uncertain about how to recover their funds. They may be tempted to spend significant amounts on legal fees in an effort to recover their money, but this may not always be the most effective solution. OCs may find themselves repeatedly receiving the same advice from corporate lawyers, leaving them feeling frustrated and unsure of their options.

To mitigate these risks, it's essential for OCs to conduct thorough due diligence on startups before extending a credit line. This may include thoroughly reviewing the company's financial records, analyzing its business model and assessing the competency of its management team. OCs should also carefully monitor the creditworthiness of startups, including any delays in payment, to ensure that they are able to take timely legal action if necessary. It's also essential for OCs to maintain a strong, legally sound contract with startups to protect their interests. A corporate lawyer can help to draft such a contract, covering a wide range of potential scenarios and creating a lien on the debtor's assets to ensure that OCs are able to recover their funds in the event of bankruptcy or insolvency.

Overall, it's essential for OCs to carefully consider the creditworthiness of potential debtors, conduct thorough due diligence, maintain strong contracts and be prepared for the possibility of bankruptcy or insolvency. While it's always important to have a positive outlook and hope for the best, by taking these steps, OCs can protect themselves and their businesses from the potential consequences of lending to startups.