Critical Care for
11: Dealing with Creditors
Advice from Arnold S. Goldstein,
Ph.D. and author of The Business Doctor
Put on a
Do not let creditor
pressures get the best of you, so you can focus on the main objectives
of the turnaround.
Preserve your sanity by hiring a hardy soul with a deaf ear, a
bullet-proof vest and a fast tongue to handle the creditors. Don't you
"dance" with the creditors. Nothing is more time consuming and
depressing than to listen to clamoring, hostile creditors.
You can't think
positively or work creatively when preoccupied with protecting yourself
from the searing heat of creditors.
But a thick skinned
employee or consultant whose life savings are not wrapped up in the
business, can leave behind emotion.
Find someone with the
stomach and the cunning to play the game.
The title of
controller or vice president/accounts payable allows your employee to
interface authoritatively with creditors.
Find some one who can
warn you about particularly onerous threats but can pacify creditors so
they won't harass you.
7 Rules to tame
1. Forget phony
To defuse creditor
pressure, the Business Doctor routinely asks creditors for a 60 day
collection moratorium while he analyzes the client's situation and
formulate a workout plan.
Most creditors agree
because the request is reasonable. When 60 days pass, he informs them
that a plan is nearly completed and will be on their desk within 30
days. This wins a 90 day hassle-free window.
If they reject the
plan, he asks for 60 more days to modify the plan.
2. Don't let
creditors intimidate you
They may threaten to
push you into bankruptcy (they almost never do). They may threaten
lawsuits (you can tie them up in courts for years). They may threaten to
report you to the credit bureau (haven't you lost your credit already?)
threats. Let push creditors know they will be paid after more patient
creditors are paid. This counter-threat works!
No matter who chases
you for money, fight back and refuse payment. You need to protect
yourself and your more cooperative and patient creditors who are waiting
in line for their fair due.
4. Don't give
your creditors security
business termination threats
6. Listen. Don't
Watch what you tell your creditors.
You may unwittingly
say things that will later hurt you. For instance, admit that your are
insolvent and your creditors can throw you into bankruptcy. Nor would
you reveal who your other creditors or suppliers are to a disgruntled
creditor, who may solicit their aid to throw you into bankruptcy.
Tell your creditors
only 4 points:
1. you are now
experiencing problems and cannot presently pay
2. you will pay
C.O.D. on future orders
3. No unsecured
creditor will receive preferential payments; all general creditors will
be treated equally
4. you will offer your creditors a fair and equitable plan to resolve
your debts within a month or two.