Get P.A.I.D. and the Continuing Credit Crisis

It’s gotten pretty quiet out there about whether businesses can get loans; what was known as the “credit crisis.”  It hasn’t loosened up very much. Maybe there is money to lend.  Maybe there isn’t.  Even if there is, it seems that only those busineses with good credit, good assets and a good business plan will qualify.  These are the best risks.

But there is still another credit crisis out there.  That is the crisis that small- and medium-sized businesses are facing daily.  The question of whether to extend credit to its customers is a daily issue.  Can we afford to use up our limited credit line on extending credit to new customers?  What if we need it for materials or staff?  Or advertising?  Are there was to reduce our risks to enable us to get the business without losing our shirts?  These are questions that are asked more and more frequently as this recession continues.

Credit managers and other treasury people need to worry about these issues and make decisions based on proper policy, proper risk analysis and proper documentation (when they do lend).

Business owners and managers:  make sure you are thinking about this stuff other than when the need is immediate.  The tips and information in Get P.A.I.D. a Guide to Getting Paid Faster (and what to do if you don’t) can definitely help.

Bob Bernstein

July 02 2009 | Uncategorized | No Comments »

Who’s Responsible For This Mess?

The facts of a recent bankruptcy case perfectly illustrates one aspect of the recent economic collapse - loan defaults. In the case, a 51 year old, disabled and umeployed debtor making approximately $5,000 per year from social security disability, took a $20,000 cash advance from his credit card. The cash advance represented approximately three times his yearly income from social security disability. The debtor used most of the money to pay other bills, such as his mortgage and utilities. He spent the remainder of the money on miscellaneous items, such as clothing, food, and gasoline. One week after taking the cash advance, he filed bankruptcy and sought to discharge the credit card loan.
 
The creditor challenged the debtor and sought to have the loan declared “nondischargeable.” The creditor argued that the debtor committed fraud because it was clear that the debtor could not possibly repay the debt. The debtor’s response was that the credit card company never should have loaned an unemployed and disabled person living on extremely fixed income $20,000.

 
So who’s responsible? Was it the debtor for taking out a loan that he couldn’t possibly afford to repay? He was desperate to pay his bills and the credit was readily available.
 
Was the lender at fault for extending $20,000 in credit to someone making less than $5,00 per year? The lender argued that the credit card was opened when the debtor had significantly higher income and that the lender had no idea of the debtor’s disability.
 
Both sides have compelling arguments but, in my opinion, THEY’RE BOTH RESPONSIBLE. Borrowers should take responsibility for their actions and so should lenders. Pointing the finger at each other is the easy way out and does not solve the underlying problem. Similar incidents are playing themselves out across the county, only, in many instances, the “debtor” is a large bank, the “creditor” lending the money is an even larger bank, and the loans are more than $20,000; they’re more like $20 million. Everyone’s pointing the finger at the banks, but let’s not forget about the debtors that borrowed more than they could afford.

 
Unfortunately, the credit lending standards of the last few years were so loose and so easy that such a scenario was possible. The economy was healthy enough that the financial institutions were able to conduct little or no due diligence before lending large sums of money. Debtors (individuals, small and large corporations, and even federal, state and local governments) slowly began to rely on this “easy credit” access, resulting in deficit spending across the board.
 
by Scott Schuster, Esq.
As debtors began to get in over their heads and defaults began to occur on a large scale, the economy suffered. As the economy failed, everyone suffered, including those that acted responsibly. Responsible debtors that only borrowed what they could afford to pay back were hurt by the economy when their retirement assets lost value. Similarly, responsible lenders that conducted proper due dilgence before extending credit suffered as investor confidence dropped and stock prices plummeted. Hopefully, individuals, corporations, lenders and government leaders alike will learn from these mistakes.

May 05 2009 | Uncategorized | No Comments »

Business for Breakfast February 11, 2009

Had the privilege of speaking this morning to a crowd of about 60 business and professional people at the Joseph-Beth Booksellers at Southside Works in Pittsburgh.  It was the Business for Breakfast series presented by the Pittsburgh Business Times.  It was exhilarating and exciting.  People learned some things about Gte P.A.I.D.

Bob

February 11 2009 | Uncategorized | No Comments »

Getting P.A.I.D. Is Critical

If your business doesn’t sell anything or you don’t owe money to anyone, there is no reason to read further.

If you are still reading, then you are concerned with getting paid or having to pay.  Making sure your customers understand the value of what they get from you and their obligation to pay, is of basic importance, yet many sellers ignore that necessary step in the credit relationship with your customers.

My book, Get P.A.I.D. a Guide to Getting Paid Faster, outlines a method and system to establish balance with your customers and their obligations to pay,  This can lead to a better relationship with customers, a greater likelihood of customers paying (timely) and, better recoveries when the customers don’t pay.

Get Get P.A.I.D. to learn the strategies.

Bob

February 10 2009 | Uncategorized | No Comments »