The most common and most likely answer to this crossword clue is the 7 letter word LOOPERS
L
O
O
P
E
R
S
Buddy explains!

The straight part
We know that "caterpillars" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case caterpillars = loopers.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.
What does LOOPERS mean?
LOOPERS noun- An instrument or tool, such as a bodkin, for forming a loop in yarn or cord, etc.
- A moth having a caterpillar which arches its body into a loop in order to bring the back part of the body forward as it walks due to having fewer prolegs, including inchworms or measuring worms in the family Geometridae and some species in the family Noctuidae.
- A (usually electronic) tool for creating music loops.
- A golf caddy