Make yourself the priority, without the pain, in your customers’ payment pecking order
Covid-19 has seen the rise of the ‘second-tier lender’. Often a small bank or building society, this ‘second tier lender’ (whom we shall call ABC Bank) provides finance to your ‘problem customer’ (whom we shall call John).
John often has little (if any) cash reserves, and a first registered mortgage on his family home. When John must pay money (that he does not have), he’ll turn to ABC Bank. ABC Bank will then take a second mortgage on John’s remaining security – his family home. This leaves nothing for John, his remaining creditors and you.
Deep in debt and without security, how can you make sure that John pays you?
1. If you provide John goods and/ or services on credit, make sure that John (and his spouse) sign(s) a credit application containing personal guarantee(s) and a charge over any significant assets.
2. Invoice John (and your other customers) regularly and with short payment terms, such as 7 days.
3. Pursue payment immediately after it falls due.
No-one cares about your money as much as you. The one exception is John – when he tries to cheat you out of it. Be smart, be methodical and don’t fall prey to John.