You don’t want to be an unsecured creditor, but what’s the alternative?
Yet another business went into administration last week despite turning over $14 million. Hallam Manufacturing is just the most recent in a long line of manufacturing businesses to collapse and even a successful trading history of 41 years wasn’t able to help it.
This will no doubt be a horrible time for Hallam Manufacturing, their staff and families. But what about the flow on effect that this will have on the businesses who are unsecured creditors who will miss out on a collective $1.9 million due to these events? It’s likely that this could have crippling effect on any small to medium sized businesses. And so the cycle may well continue maiming the cash flow of these businesses due to circumstances beyond their control. Or was it?
Each of these businesses extended a line of credit to Hallam Manufacturing likely deciding, after weighing up the risks of providing their goods and services to a company with a long established history, that they weren’t taking a big risk. It’s very likely that in the lead up to the collapse the terms of their credit were stretched in many cases but they kept supplying and giving their client the benefit of the doubt that the payments would return to trade terms again soon.
Unfortunately, due diligence didn’t pay off and they will now be left out of pocket. The usual practice of a completed credit application, checking historical references and maybe even a directors guarantee may go a way to providing some level of comfort when you extend a line of credit, but there’s no real way of knowing what’s going on in that business now. Yes they may have been able to pay their bills 10 years ago, even 2 years ago or 6 months ago. But the most important thing is: can they pay your bills right now?
So if a long track record is not much help to you if you are giving a client a line of credit what’s the alternative? Get your clients to secure the funds for your work in advance. Make sure that money is put aside for your company and only you. How do you do this – with an escrow service.
Escrow is not a new idea, but at CheckVault, we have simplified it and are bringing it to the masses. We want to make sure every business who wants security of their payments is able to get it. We have made payment security accessible by making it fee free* and available via internet so there is no software to download. With transparency of payments and communications as well as a free tender and quoting management application through CheckTender we are pleased to provide you with a new, secure way of doing business.
Even if you know your clients and have worked with them for years – why take the risk like Hallam Manufacturing’s suppliers did?
Don’t become an unsecured creditor. Get Secured with CheckVault and get peace of mind for your company, staff and families.
Click here to get in contact with us and we will help you get secured.