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What to do when you can't pay your bills

Wed, 30 Apr 2008 13:26:00 -0700

Every Business Owner/Manager should read this. Change, is a word that describes what happens every day to every one of us. Running a business in today's economy forces change, sometimes hourly. Often the biggest pressure on a business owner/ manager is that of facing creditor demands for payment. It is the juggling of payroll, rent, taxes and other essentials that first causes delay in payables processing. Rather than agonizing over creditor demands, it is better to realize that almost all problems can be turned into a procedure. By recognizing that there are options available for an orderly approach to cash flow shortages, a manager is able to decide which to select. Rather than suffer sleepless nights, consider what can be done and then when and how a chosen path will be executed. So that need and potential benefit may be measured, professionals have isolated six steps that serve to identify available direction for a business manager. Once aware of these six, a business debtor can better determine which to use to best resolve an existing situation. But first, it is best to discuss the six with an attorney and/or accountant, or a trusted advisor to obtain input and endorsement of the preferred chosen path. This review, with an already trusted professional is particularly recommended for a debtor's peace of mind. In essence, he will gain support for what he wants to do. Also this is suggested to determine which professional should be engaged to fulfill the selected action. When one decides which movie to see, anyone's advice may be taken. To decide which cancer treatment to try, it's better to select a a trusted professional. Knowing what steps are available provides a track to run on; that alone serves to reduce personal stress. Many will find these steps basic, they feel they know all this. Yet, when deciding which fits a considered need the selected process should be coupled with a realization that each step requires a different activity and more than likely a different professional. Being able to select where to start, and which professional to engage will best assure the result (read success) you desire. Professional implementation at any of the six levels is always better than to act alone. Here are the six defined workout processes; they are listed in order of the most to the least desirable. Rehabilitation, or extreme cost cutting. Refinancing, to find new sources of capital. Seek new equity, exchange some ownership for capital. Debt Resolution, the process of delay and/or attaining satisfying settlement with creditors. Sale of a going business. Liquidation, using a variety of options such as selling pieces of the business, the whole business, or the act of bankruptcy (which sadly often includes the owner/officer and possibly his/her spouse). A business owner/manager should reach for help sooner, not later. Having a known advisor's review of these points and then engaging professional help will complete the selected but workable process far better than if individually attempted without use of an experienced professional. There is no substitute for experience, one should not attempt to work these processes alone. Engage a professional, one who is experienced and capable in the selected activity. Doing so leaves the business manager free to run his business. Business survival is a destination reached by consideration of which road is to be followed. __________________________________________ Jim Herst, is Chairman of Performance Source Inc, since 1963 serving businesses nationwide that have debt they want to pay but can't. His process can be seen on line at www.performancesourceinc.com. Jim welcomes comments and questions at herst@psi1963.com.

Bill's bill

Wed, 19 Dec 2007 15:49:43 -0700

Written by Jim Herst Bill's bills. First, it was the letters and calls from his creditors, then their collection agencies. Next, it was an attorney's demand letter. Without any notice, a Summons arrived requiring a court appearance. Bill's delinquencies stemmed from a number of things, less sales, fewer customers, higher operating costs all adding up to his not generating enough cash to meet his payables. He had heard ads offering loans, consolidation, credit fixes, second mortgages. Business brokers implied they had buyers for his business. What to do? He could run and hide, he could stall, even ignore phone calls and letters. Maybe he could sell his business and pass his problems to another? His accountant told him he was fiscally bankrupt, his attorney (at $200.00 per hour) told him he was fiscally bankrupt. Never mind what his wife told him. On examination his options were all negative responses, not offering any kind of solution he could use. A loan was costly, requiring full payment at high interest; consolidation meant he would pay all in full but it would prolong his crisis. A second mortgage was no good, he already had one and he would not qualify for a third. A buyer would not take his debt, and bankruptcy would leave him with nothing except a 10-year mark on his credit report. Bill at first believed he could persevere and work out from what had become an unmanageable problem. The endless effort to placate creditors would soon became a full time job, keeping him from what should have been his main task, taking care of business, being a boss, working to right what already was a sinking ship. Having seen the suit in the public record, I approached Bill. His first reaction to me was, he had an attorney, he knew his options, and debt settlement wouldn't work because he knew which creditors who most surely would not accept settlements. He was resigned to work solutions on his own or to bankrupt. He had already arranged two settlements, both at 80% of what he owed. It was tough to get him to tell me, but he conceded he had been unable to make even the first payment on either of the arranged settlement commitments. And, the phones kept ringing. After further discussion, he began to realize what Professional Debt Management might do. I explained how we immediately would stop all creditors from contacting him, thus leaving him free to run his business. Though we're not attorneys he liked suggestions on how his court appearance might be handled. He liked it when showed how we approach creditors and obtain settlements for 20 to 70 cents on the dollar. Best of all, he really got excited when he saw how settlements could be spaced to be paid when he was ready, not at the demand of his creditor. He very much liked the fact we work on contingency, and are only paid when he approves and pays a settlement. Bill's bills were settled. Initially 23 creditors were owed in excess of $125,000.00. After paying our fees he saved 53% (over $68,000.00 saved!) of what he owed. Best of all, selected creditors agreed to again sell to him. He stayed in business retaining the possibility of later selling his company with a cleaned balance sheet supporting a profitable operation. Important too, in time his personal and business credit ratings were restored to acceptable levels. If your situation is worthy of saving big money, developing a balance sheet to satisfy any inquiry and to position your business (and your life) so you are in control, I invite you to look carefully at what an experienced Payables Manager can negotiate for you. Nationwide since 1963, tens of thousands of debts have been settled by us that have satisfied both creditors and debtors. Users also engage us when closing a business. Our debtor/clients have saved in excess of 35 million dollars. We have the proof and it's available to you, along with Bill's record, to back up that claim. Our Users are Lovers. It's possible, like Bill's bills, yours too will become little bills. All you have to do is ask. This program is available for your review; talk with Steve Newman without commitment on either side. See us on line: www. performancesourceinc.com. Call us: 800/883-5080. Email: snewman@psi1963.com. �2007,

Ask Steve

Tue, 04 Dec 2007 17:56:00 -0700

Overheard Didja hear the story about the guy (Joe) whose business was faltering to a point where he could no longer pay his bills? Seems Joe had worked hard to build what he thought would really be a winner. Instead, the economy, the weather, his wife's brother, and lotsa things came all at once; he found he just couldn't make ends meet. He ploughed more money into his business and soon found some relief, and then it all hit the fan. The debt load rose along with the interest rates he was forced to pay on the borrowed money. Even his golf handicap went up. Soon, some vendors came knocking on his door, wanting money. He made promises, even kept some of them. Then, at his nephew's grade school graduation (it was a hot, late June day, no air conditioning), he overheard two other guys talking about their relationship with a payables management company. One, having arrived late, said to the other, his brother, he was delayed because he waited to hear how good the debt settlement went with their biggest creditor. The latecomer was ecstatic; the settlement was at 34 cents on the dollar. Thirty-four cents on the dollar! Our Joe would have given his right arm for that deal. The graduation ceremony was boring. Joe sat there, wondering. Dare he ask these guys to share their experience? He would claim honestly, he'd overheard most of what they said. But he'd prefer to listen and learn, and not divulge his real problem. He approached, indicating he had in fact heard, and that he would ask, on behalf of a friend who he knew had a similar problem. Well, the rest of the story is really interesting; you see, the two guys laid it all out. They had owed over $250,000.00, and after being sued they were approached by a payables management company, offering, on commission, to settle their payables with possible savings of 30 to as much as 80% on the dollar. Our Joe knew this is what he needed, so he asked either of these two for the name of the magician who did this. They said, he should call me. Steve Newman, 800/883-5080

Poor Jenny, Didn't have a Penny

Sat, 27 Oct 2007 08:21:11 -0700

Submitted by Jim Herst on Sat, 2007/10/27 A Multi-Unit Franchisee Sees Debt Trouble With Lease Commitments From Expansion Ira Gershwin wrote of Poor Jenny, who didn't have a penny, and that's about the same as a franchisee debtor who asked us for help. The problem, leases! The ZEE had three gift-goods stores in a thriving summer vacation/tourist city on the mid-Atlantic coast. Store one was downtown. Store two was in a shopping mall. Store three on a boardwalk by the beautiful sea, tourist infested from 10 AM till midnight seven days a week, but only about five months a year. Each lease ran to his corporation, and was guaranteed personally. The ZOR was not a party to any of the three leases. Our debtor/client/franchisee, thrilled with profits since 1997 from store one, simultaneously ventured growth by expanding to the mall and to the boardwalk. Problems soon affected the other two locations. The mall had never attained substantial occupancy. Traffic was less than touted by the developer, one of the largest shopping center operators in the country. The year 2006 was a disaster; sales at all locations were less than half of 2005 sales. The cash crunch was excessive. By spring 2007, store sales at the mall were half the monthly rental. We were hired. As of June 1, 2007, the remaining 34-month term of the mall lease was a potential rent liability of $207,795.00. Our intercession enabled a settlement and mutual release for $18,000.00, payable in three equal monthly payments of $6000.00 each. The boardwalk lease was tougher. A decision was made to stay through the summer of 2007, expecting sales and profits would occur. They didn't. Here, the potential rent liability was far less. As of September 30, 2007 it would be $31,395.00 through December 31, 2008. Actually this became a tougher negotiation ending with an achieved settlement of $1,680.00. Many factors affect lease settlement and most commercial leases offered by experienced developers are bulletproof. Why tell all this? From a franchisees point of view, he was euphoric over profits earned from his initial store. Because he was dealing with local rental agents, people he knew, he felt he had no need for representation to oversee his rental commitments which he felt would support his growth and profits. He might have asked his ZOR for help; I don't know if it would have been available. Most likely the ZOR would have encouraged expansion, and might well have been helpful in providing some safeguards for the ZEE's possible setbacks. When dealing with professionals, seek professional assistance. This was proven at both ends of this situation. If you are facing any area of debt problems, I again invite your anonymous submission for review. Jim Herst is president of Performance Source Inc., a nationwide strategist organization serving business managers with credit restoration and payment settlement systems in addition to designing cash flow processes. More information about his 45-year-old firm is available on site at performancesource inc. Or Call Jim at 800-883-5080.

"I Can't Do That!"

Tue, 16 Oct 2007 11:16:31 -0700

Submitted by Jim Herst on Tue, 2007/10/16 In Negotiating with A Franchisor During Bankruptcy, a Franchisee May Think, "I Can’t Do That!", But Here's Why They Can and Should Too often I hear from a debtor, a franchisee, exclaiming, I can't do that! He's objecting to advice from me that a fiscal obligation be approached seeking a settlement. Let me explain. Knowing that a contract exists, one carefully detailing what must be paid if such and such happens, my debtor/prospect rues that he must absolutely do what he contracted. In this instance, a ZEE, fiscally bankrupt, has closed his business, yet finds himself contractually obligated to pay money to his ZOR. I agree, the contract does call for complete satisfaction. However, the ZEE hasn't got the money! The options are few, so thinks the ZEE. He can borrow money to satisfy his contract obligation. He can approach the ZOR and beg relief and possibly arrange a long-term payout. Because the amount owed was big, and because this ZEE has many other big obligations he can consult a bankruptcy attorney and seek relief of all his debts. All good alternatives, yes? No! Borrowing money to pay debt only incurs more debt. Agreeing to full pay over time is dragging an anchor weighing down an ongoing journey to a new and hopefully better future. Bankruptcy, another option, is really no solution in that it becomes surely a personal impediment and usually an embarrassment. Worse, bankruptcy laws as now exist often impair a debtor so greatly that he may not qualify for total relief. (Discussion of bankruptcy laws can be a topic for a major blog. But not here, now.) What to do? We suggested: Seek a settlement. Again I heard, I can't do that! They would never agree, they will sue me; they have ways to make my life, my whole existence horrible. They have ruined the life of another who failed and they'll do the same to me. From experience, I disagreed. A creditors legal choices notwithstanding, most will accept settlement! The key is in the presentation that seeks the settlement. However, a poor presentation can lead to non-acceptance and that may lead to the feared lawsuit. But recognize, almost all suits for money are settled at the last minute on the courthouse steps. Such fact tells something. It tells that a strategically designed offer of settlement, presented factually can work. In this instance, about $125,000.00 was contractually due the ZOR. My Debtor/Prospect suggested he would be happy if he were to achieve a reduction of 33% with the balance, $83,000.00 payable over four years. Sound good? He thought so. I didn't. Yes, I did have to do some power selling, and my Prospect became a Client. Since this was the biggest obligation of his six outstanding debts, I approached the ZOR and over a four-week period of negotiation, the debt was settled for less than $20,000.00 with four equal successive monthly payments of less than $5000.00 each. His other debts were also settled at the same rate, 14.25% of what had been owed. The ZOR wasn't intimidated. The ZOR wasn't fooled. The ZOR, when consenting to consider alternatives, negotiated in good faith with an Authoritative Third Party (us) and was positioned to see a mutually acceptable solution that resulted in ZOR's realization that a bird in the hand is better than two in the bush. The moral of this event? Everything is negotiable. In 45 years in the business of Debt Settlement, it is apparent that a well-presented and factual offer will gain an audience and in most instances result in satisfaction for both parties. This is a reinforcement of the principle that there is no substitute for experience. If you are facing any area of debt problems, I again invite your anonymous submission for review. -- Jim Herst is president of Performance Source Inc., a nationwide strategist organization serving business managers with credit restoration and payment systems in addition to designing cash flow processes. More information is available on site at performance source inc. Or Call Jim at 800-883-5080.

Franchise Partner Blows Company Money in Vegas, Part Deux

Mon, 08 Oct 2007 11:12:31 -0700

Submitted by Jim Herst on Mon, 2007/10/08 Jury Refuses to Indict Wayward Partner A prior blog, Franchise Partner Blows the Company Money in Vegas, described how a partner in a franchised business-to-business service operation had gone to Vegas, lost big and then converted money to himself from credit cards issued in the name of the business. The problems are extensive, in that the other partner (the good guy) had alone signed for the credit cards and was personally responsible. Once the fraud was discovered, the injured partner notified the states attorney's office and sought a Grand Jury hearing. The hearing was held in mid-September, and the Jury refused to indict! The reason an indictment was refused was that the injured partner had the duty but failed to exercise oversight. Thus, the law apparently turns a deaf ear when partners don't watch each other. I defer to Richard Solomon who far better than I can detail this legality. A civil suit has now been filed and appears it will not be heard for many months. In addition, we advised the injured partner to seek damages due to Identity Theft. If you recall the original blog, the bad guy had sought and received big cash advances from these same credit card issuers. At this juncture, the credit card issuers are pressing for payment from the good guy without regard for the obvious fraud. Effort to resolve this debt is in process, and the expectation is that some conciliation will result. The two big lessons are: Watch all aspects of financial dealings, especially on those not initiated directly by you. Next, too many believe they are exempt personally when entering into agreements in the name of their business entity. It is essential that all financial matters be scrutinized and understood. Easy access to credit still exists and is too often a temptation. This was especially true when the bad guy saw how easy it was to use his partner's name. If you are facing any area of debt problems, I again invite your anonymous submission for review. -- Jim Herst is president of Performance Source Inc., a nationwide strategist organization serving business managers with credit restoration and payment systems in addition to designing cash flow processes. More information is available on site at performance source inc. Or Call Jim at 800-883-5080.

The Credit Crunch and You

Fri, 21 Sep 2007 10:47:46 -0700

Submitted by Jim Herst on Fri, 2007/09/21 How to Keep Your Cool While All Around You Are Burning Credit is a funny thing. We work to achieve it, process it promptly when we can, and worry about it when we can't pay our bills. Think about that new car you originally had. A flat tire meant things were not right, requiring immediate action just so you could keep moving. Surprise! Credit is like that too. As soon as bill paying becomes a problem it tends to stop forward motion. However in reality, like one flat tire, it's only a percentage of your problem. Problems are best successfully handled when they're turned into procedures. Let's start now to fix the problem. Address the inability to pay by telling your creditor up front, that you can't pay. No other explanation. Don't offer excuses, don't commit to a later pay, don't try to compromise the debt. Instead, work like crazy to generate cash flow. After a month or so such activity take stock of exactly where you are, financially. If not enough cash exists to pay debts, don't pay any! It is at this juncture you sit down and carefully construct a pro-forma, a single sheet projecting near term (six months) income and expenses. This enables you to see your real situation, based on the prior thirty days experience and projected by your best realistic expectation. It is now that you face the facts: If you have the money, you can pay your debts in full, or offer (only if you can execute) progressive extended payments. If you can't do that, stay firm, pay no one and expect lawsuit(s). These, if ignored could result in judgments. These activities occur while you are still seeking to work to achieve cash flow. And, you are paying no one. If the process of seeking cash flow works, in near time you can start activating progressive extended payments. If insufficient cash flow is generated, and your pro-forma so showed, one alternate is bankruptcy. There are other alternates. No one wants Bankruptcy; so instead consider engaging services on contingency by a Payables Manager who acts to advise you while dealing creatively as an Authoritative Third Party with your creditors. Either you change the tire yourself, or you hire an experienced expert, one capable to achieve satisfaction acceptable to you and your creditors. Make the change yourself, if you really think you can, otherwise consider professional experienced help. It is available. The moral of this is, one way or another, you keep moving. Jim Herst

Franchise Partner Blows the Company Money in Vegas

Mon, 27 Aug 2007 10:36:05 -0700

Submitted by Jim Herst on Mon, 2007/08/27 - 13:37. Two Big Lessons from Real Life: Financial Oversight, and Whose Name is the Company Credit Card in Anyway? Two bought a franchise as partners, a business-to business service operation. Partner #1 was to do the selling, the other, #2, the inside buying, scheduling, training, etc. Business was very good. Profits were immediate and growing. Their principal supplier, the franchisor (ZOR), agreed to take credit card payments for supplies which were more than 80% of all the franchisee's (ZEE) purchases. Being new, the two arranged and used three credit cards from three different issuing banks. Each card was issued in the name of the business. This worked well, their monthly need for credit with the ZOR exceeded the limits of any one card. After years of successful growth, Partner #1, having completed a divorce, went to Las Vegas with his soon to be next wife. He took more than one gamble. He lost big money. So he used personal information about Partner #1, he obtained a new credit card from still a different credit card issuer and obtained high credit of $50,000.00. That card, as were the first three, was in the name of the business, a corporation. Partner #2 then began making minimum payments on company checks to meet the monthly statements on the $50,000.00 credit line. He had personally used 100% of the $50,000.00 You guessed it, confronted by Partner #1 he denied he had improperly sought that credit line (he lied) and stated he believed Partner #1 made the application and funds due were business expense. Other malfeasances soon were uncovered; yet Partner #2 had excuses as to each. We obtained a copy of the application for that 4th credit card, and it contained what appeared to be the signature of Partner #1. Yes, it was forgery! The plot gets thicker. There were more instances of fraud by Partner #2, using personal data about Partner #1 or otherwise pledging the credit of the business to obtain money then used by Partner #2. The case is now going to a Grand Jury, and includes a charge of Identity theft as well as fraud. At this writing, the credit card issuers are in limbo and I admit I don't know what the eventual outcome will be. All four card issuers had stopped card use, we have since reinstated credit on behalf of Partner #1; thus the business is operating. One lesson: oversight is always essential. Another lesson: credit cards issued in the name of a business are almost always issued on the personal credit and signature of the applicant. At the risk that I'm advertising, this situation would not have been adjusted unless handled by an experienced third party. The Grand Jury will hear this matter in mid September. I'll provide an up-date then. If you are facing any area of debt problems, I again invite your anonymous submission for review.

The Franchisee With the Insurmountable Lease And Its Satisfying Amendment

Thu, 16 Aug 2007 11:26:00 -0700

Or What Can Be Done When Your Back Is Against the Wall Submitted by Jim Herst on Thu, 2007/08/16 - 12:57. The scene: A strip mall, away from the central city (pop. 185,000), well situated on a busy commercial street. No "real" anchors. This franchisee was operating a double store, making money until a non-franchise competitor opened two blocks away. The business was rental and/or purchase of expensive product with a seasonal preference. The objective of the franchisee, our client, was to renegotiate a lease and to delay payment to key suppliers. Beside cutting useable space by half, it was necessary to apportion costs to construct a separating wall, separate utilities, etc. Having this all dropped in our lap, here's what was done. The Landlord was quietly advised that unless he co-operated, his tenant, our client, would be forced to fully vacate, leaving without making payment on the yet-to-run three years of tenancy. We knew that one other store in the strip was vacant, this fact worked against our effort. Instead of our direct involvement with the landlord, we instructed our client on how to handle the negotiation. It took our client two meetings over five days to achieve agreement. Costs to restore the abandoned space were divided equally, with our client's portion payable in three equal monthly payments. The lease was amended by formula of 50% less 10%, and with a three-month moratorium. In actuality, the pro rata restoration costs were less than one month's rental of the amended lease. Overall net result was an immediate improved cash flow for our franchisee-client as well as better lease costs for the following three years. We dealt with creditors, achieving significant savings on past obligations coupled with creditor's acceptance to continue selling this debtor at market price, COD for six months and an agreement to then consider open account terms. We've seen this type of situation often, and each experience serves to strengthen our ability to achieve acceptable benefits for a distraught debtor. What you do when your back is against the wall is important. To struggle alone is foolish when in fact there are matured, experienced resources available to provide advice. Keeping your own counsel is often best, if you know best. The world is full of a number of things, said Shakespeare, so it may be best to look for and use the best. I'd like hearing from readers having pressing financial situations. You need not divulge who you are, and I'll seek to provide experienced advice. Let's do it!

Some Franchise Agreements Make Debt Recovery Tough

Fri, 03 Aug 2007 09:46:00 -0700

A Case Study of a Failed Franchisee Submitted by Jim Herst on Fri, 2007/08/03 - 10:21. But Wait. There's Hope. A Case Study of a Failed Franchisee In a continuation of the opportunity to look at the financial frustrations of a failing or failed franchisee, I'm learning that all birds of a feather do in fact have different frailties. Yes, some franchise agreements are so very tough that the appearance of recovery of anything is dim. But wait. Having served tens of thousands of businesses, those franchisees served always had personal pressing obligations. Most had lease obligations, personally guaranteed. Many owed money to their ZOR. The majority had loan obligations to banks, family, or credit card debt. Vendors, other than ZOR were almost always owed some money. These liabilities appeared overwhelming, which they were. Here's a true story: Though I can't use names. A novelty retailer's sales dropped more than 50% in the three months following Big Box's opening two miles away. His shopping center location was tied to a lease having 4 more years to run. Debt to his ZOR was $38,354.00, loans were $78,000.00 and over $50,000.00 was due other vendors. Each creditor was approached. ZOR accepted a three-year payout at 60% of the owed debt. The lease was settled for 11.4%, that after the debtor's attorney had said it was bulletproof. Loans, including four credit cards, were closed at 56.8%, vendor's accepted, in aggregate, 28.6% of what was owed. Miraculous? Not so. In essence, everything is negotiable.