New Response To “You’ll Get Paid When I Get Paid”

 

One of the most common excuses we hear in B2B debt collection is a business is struggling to collect from its customers and therefore can’t pay its vendors. Typically the business owner will commit to paying when they get paid, but the problem has been going on for months and there is no end in sight.  With the advent of the alternative financing market, now there is a new solution.

We recently did a comprehensive assessment of alternative financing suppliers and found over 700, including:  

  • 260 providers of business loans;
  • 153 platforms for raising equity;
  • 99 providers of consumer loans;
  • 274 platforms for raising donations for charitable causes;

The alternative finance market is expected to exceed $34 billion in 2015Many of them advertise that they can make lending decisions within minutes, fund within days, and can even finance businesses and consumers with terrible credit.  While we can’t confirm how quickly they actually fund, we know from claims placed with our commercial collection agency that bad credit does not keep companies from getting financing.

So, the next time you hear that your customers can’t pay due to cash flow problems or unpaid receivables, tell them to check out the Alternative Financing Directory that we just created with the over 700 sources we identified.  Ask them to borrow money from someone who is in the business of lending instead of from you.  The directory has 6 different search filters, so it is easy to identify the financing sources that best fit the potential borrower’s needs.

The alternative finance market, including crowdfunding and peer to peer lending, is expected to exceed $34 billion in 2015.  That is more than the $30 billion that venture capitalists will invest this year.  This market is doubling in size each year.  Investors are enticed by the higher rates of return available through these channels.  There is no shortage of available money and there is a wide variety of different types of financing.

We found 8 different debt products being offered:

  • Merchant Cash Advance
  • Revenue (or Business) Cash Advance
  • Accounts Receivable Financing
  • Factoring
  • Inventory or Working Capital Loans
  • Purchase Order or Supply Chain Financing
  • Asset Backed Loans
  • Unsecured Loans including MicroLoans

Each of these products are explained in our Alternative Financing Landscape analysis.  The interest rate can be as low as 5%.  However, the implied interest rate on some products for businesses with bad credit exceeds 100%.  Even Tony Soprano and his loan sharks didn’t charge as much.  However, these lenders often don’t even require a personal guaranty, so borrowers don’t have to worry as much if they suddenly can’t stay current on their payments.

Our implied interest rate calculator makes it easy for borrowers to compare offers from multiple sources so they can select the least expensive option.  We also detail 8 specific warnings to potential borrowers – we don’t want to see people make mistakes that end up digging a much deeper hole.  

We are referring some of the business debtors we are collecting from to the directory, asking them to borrow money from a lender so they can pay the vendor we represent.  Whether they choose to borrow or not, it makes for an interesting conversation and helps us make progress on these problem accounts.

So, the next time you hear your customer say “you’ll get paid when I get paid” or “we are having cash flow problems,” send them to the Alternative Finance Directory and ask them to borrow from someone who is in the business of lending.  If they can’t or won’t borrow from one of these sources, then you know you have a more serious problem that is going to require special attention to get resolved.  

 

 

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About The Author:

Dean Kaplan is Principal at The Kaplan Group. Dean's exper­tise is widely rec­og­nized in the debt col­lec­tion indus­try. His advice has been pub­lished in a num­ber of indus­try newslet­ters such as Credit Today and InsideARM and he is a fre­quent speaker at indus­try events.