Runaway Unsecured Vendor Debt Be Gone!
Unsecured creditors–usually vendors–are on the bottom of the payment food chain. The secured loans or leases clearly come first as they are supported by collateral and the holders can liquidate the collateral for your failure to pay. We have strategies to cope with this issue but our focus here is on the unsecured debt, the general vendor debts that have no collateral, few personal guaranties, and which in default or liquidation only get paid after the secured debt is paid in full.
These vendors are at huge risk. If the company fails, the debts to them seldom if ever get paid. If a bankruptcy is filed these debts also seldom get paid and when they do it’s for pennies on the dollar. They have chosen their position and have delivered goods and services on a hope and a prayer that the business will do well enough to honor its bills and pay them. Yes, unsecured vendors can sue for payment and can eventually attach the business assets, but upon liquidation for the benefit of the creditors, the banks come first and the unsecured vendors usually get nothing. That is their reality. In times of dire straits, financial pressure, lack of adequate capital, the unsecured vendors will not be paid and there is little they can do about if there is insufficient capital and value to satisfy everyone’s claims and demands. This makes these debts highly speculative when times are tough and most likely to go unpaid.
There are strategies that will divest the business entity of all its unsecured debt, without filing bankruptcies and without legal proceedings of any sort. These strategies are extreme and are implemented only when the collective demands from unsecured vendors get out of control and threaten the continued operation of the entity, when they must be cleared away and the business reset to run again without such obligation.
Sounds unfair, unscrupulous and unsavory, right? I believe not. All unsecured vendors choose to accept their position and lack of security. They all understand the risk and accept the potential for loss. It is a part of their business model. If they did not want to be in such a vulnerable position they could have refused to provide open terms without guaranty or collateral. They opted not to do this and accepted the risk of default with little recourse. Why? because this is the way business works for the most part, with unsecured vendors providing goods and services, with little security, hoping to be paid. If the business does not work out well, the fact is that they suffer the consequences and usually cannot collect.
In this daunting downturn, many businesses are experiencing a huge decline in revenues and thus are forced into not paying their unsecured vendors. This creates a problem which tends to siphon off capital from the suffering business until the business is unable to operate effectively. This is when you know you need to do something severe to prevent collapse. This is when you need to consider our strategies for removing unsecured debt from your list of problems. Yes, we can also handle secured debt but that is a different story. Sometimes removing unsecured debt is an adequate resolution for liquidity issues and frees the business to continue to emerge from the recessionary pressure of the reduced revenues many are experiencing. Out-of-control, unpaid, unsecured vendor debt is not a reason to fail but it must be confronted and resolved. Call us for a discussion on what we can do for you.
