Yes. - Posted by John Behle
Posted by John Behle on May 30, 2000 at 13:34:17:
You would approach your opportunity here like a normal consumer finance decision - with a twist.
There are three things that can help make sure you are paid. First is the “desire and ability” of the payor. You check that through a credit report and a loan application. There are a couple options. One is to get a copy of and adapt applications from firms like Associates or others that are in the consumer lending area.
They fill out a loan application and you check credit. You can then select a customer that has a high probability of paying you. Now, keep in mind - you don’t have to keep all the accounts. You could finance and sell off some of the borderline or questionable ones to “factors” - though they’ll want some good discounts. You could then keep the “best” paper if collections and dealing with the people seems like it could be a nightmare.
Collections is the second factor. Professional collections is a good option to consider. Some people will pay fine if someone “rides” them a little. Many will take advantage of you if you aren’t willing to send out a few “nasty grams” from time to time.
Even if you did your own collections, you are best to “third party” it - at least in their minds. You create another company that is a collections company and the note is sold to them and they collect. It doesn’t matter that you entirely own and control this new company. It separates it and collections will be better. You also aren’t in the position of possibly straining the relationship with a customer.
When someone can’t pay a bill they look for an excuse and take exception with and fault a perfectly good service or product. The further the distance, the less likely that will happen.
NOW - a better option would be to seek some collateral. That can be a product you are selling and almost any form of collateral is better than none at all. The best bet is always real estate. If the buyer of your product or service has equity in real estate, then you have the opportunity to just create a trust deed and trust deed note against the property.
You can offer them much better terms - because you have a much more valuable note. They can likely deduct the interest on the note too, where they might not be able to in a transaction that is unsecured or secured by some other collateral.
If you create notes against property in some or all of the transactions, then you have a valuable, marketable, financable form of paper. You can keep the notes, sell for cash or even sell a partial. A partial might look like selling the first half of the note. For an explanation about partials see my article titled “Tall Tails” at my website.
You can also borrow against the notes. You have a good solid cash flow that provides good collateral for an institution or private investor.
You may find you can sell much more of your products and services, provide an attractive alternative for your customers, increase your monthly cash flow and even build a retirement income.
