What To Do If You Might Miss Your Business Financing Payment
At Financing Solutions we are funding every day to businesses and sometimes the recipients of the business funding have problems in their business that will cause them to miss payments unexpectantly. Certainly one of the things we try to do at Financing Solutions is to give money to businesses that we feel will be able to pay us back. However, sometimes things happen that neither us, nor the business owners, expected.
The clients that lenders are willing to be more lenient with when missing a payment are the ones that are honest and upfront. They let the lenders know what is going on in their business and why the missed payment happened in the first place. Some really good business owners will even call the lender ahead of time and let them know that the business payment will be missed and why.
The key is open communication. There is nothing worse to the lender when a business owner will not answer the phone or continuously dodges phone calls. If the owner is being up front with us and we see that the business owner is concerned about getting back on track with the payments, many lenders will be flexible.
Let’s take two actual scenario’s that happened to our company, Financing Solutions.
This real client borrowed $15,000 and made 22 of the 60 payments. We then received word from our bank that the daily ACH bounced and when we called the client they told us that they hadn’t received their payment from their client and therefore had no money to pay us. They had no plan in place to resolve the issue and asked us to call them back tomorrow. When we called, the client continuously dodged our call and would not return our calls. After 10 days and no returned phone calls, we were forced to foreclose on the financing which cost the client not only the $15,000 principal but also daily interest, lawyers’ fees, and court costs. In 3 months, the business was required to pay by court $33,000 or liquidate their business. The business was a good business and instead of closing its doors, the business owner paid the $33,000 resulting in about $10,000 in unnecessary expenses. Foreclosing on a client’s financing is often the last resort of the lender. However with no communication, it really is the only option for the lender.
Scenario two is a better outcome for both the lender and the business owner. This client did a lot of business with the government and one of the major invoices coming due was not processes correctly. The owner called Financing Solutions and let us know that there was going to be a problem with making payments. The business owner told us how long it would take to resolve the issue and he promised to call us with weekly updates. He told us his plan and showed us copies of his bank statements. He told us what actions he took internally to delay his other expenses so that we could be paid first and he communicated to us when he felt things would get back to normal. Whenever we called him and left a message, he called us back. He was upfront, honest, and credible. He believed in his heart that he made a commitment to us not just in writing but also personally. It was obvious to us that he care about his debts. We brainstormed with the owner and came up with a plan. Financing Solutions cut his payment to 25% of the original amount. In 30 days, our client received his payment from his client, called us, and we returned to the regular payment schedule. Not only did the client pay off the money but 12 months later when the client needed more short term funding from us, we approved it in 15 minutes.
The key to this story of course is that honestly, integrity, open communication and a plan, are critical to resolving an issue when you might miss your financing payments. Talk to your lender and try to understand how they feel. You will find that the lender will work with you and it will save you a lot of time, stress and money.
Financing Solutions (www.payrollfinancingsolutions.com) provides fast business financing of $5,000-$100,000 to good small businesses with sales of $500,000-$7 million that can be used for working capital.