An independent business owner contacted me after reading several of my articles on business turnaround consulting and business process improvement consulting. She asked if I could help her. I asked if she would write me note about her situation. The following is her message:
Steve,
I decided to get in touch with you because I am very close to running out of cash. I don’t know how I will pay on my loan payments next month because at the moment I don’t have any funds for that.
I feel like I am really close to generating positive cash flow with my business but I am still stressed about how I will pay on all accounts/loans that I am responsible for. I feel like I just need to buy myself more time.
I am doing my best to maintain my positive attitude, faith, and belief but I am scared. I’ve applied for additional credit cards but have been denied. As a result, I’ve started to search for a job, which I know is taking my focus off of where it is I want to go.
Financially, I’ve never been where I am at the moment.
If you can help, I am grateful. Even if you are unable to, I am still grateful.
Thank you,
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I asked her permission to publish this on my blog as I have actually been planning to write an article about what many people are experiencing for a variety of reasons. Full disclosure: I am a business turnaround and business process improvement expert. I am not a personal financial planner, personal bankruptcy lawyer, personal financial counselor. My experience in this area are very direct and from the streets. If you would like additional support for what I about to tell you, read Bill Bartman’s book “Bailout Riches”.
Notice some very important words in this lady’s description of her situation: faith, belief, scared, “I am responsible”. So my response is written for those who have similar feelings.
About Being Scared:
This is natural particularly since this is the first time she has found herself in this situation. The key is to acknowledge that and just move outside of yourself and observe it. This takes some practice but it can be done. Realistically, we become scared of losing our life, our “stuff”, a place to live and starving. In the worst case scenarios a woman will be not homeless. Nobody will starve to death and stuff can be replaced when the economic situation turns around. In my belief system I have learned how not to fear death. Once you no longer fear death then there is really nothing else to fear. On that topic “Home With God” by Neale Donald Walsch is a great read.
Now I know writing about fear and being scared does not make it go away. You can release these emotions. In fact you must release these emotions or you will have difficulty moving forward which is really what your intending to do. Now for the art of the practical of why you can expect:
I am going to assume she is fairly current on her payments and realizes that will change next month. My advice is to stay focused on immediate needs only while continuing to solidify cash flow from her business. Immediate needs are food, utilities and those service needed for her business. These generally include Internet service and phone service. TV service is not an essential. Car insurance is. The key is to evaluate true essential spending.
For now paying credit card debt and mortgage payments are also not essential. If you are a renter, you may have less time in your place than if you have a mortgage.
Going Forward
This lady mentioned feeling like her business is close to cash flowing. I recommend anyone who has a business ask someone else with business experience for a realistic evaluation of that feeling. This is the number one item I work on in a business turnaround after addressing immediate cash management issues. With the confidence of how a liquidity crisis turns around you can navigate any obstacles. Now if you don’t have that confidence then you should begin pursuing plan B. She mentions looking for a job. That may not be her first choice but it may be a realistic stepping stone until she can turn her business cash flow positive. That is for her to decide.
What To Expect From Credit Card Companies and Banks
The reality is you will get a lot of phone calls. Most of these calls will be made by a computer. So it is a great idea to have a caller id phone that you can put on silence or vibrate. You don’t want to answer a call unless you know the caller and you want to talk to them. The natural inclination is to want to talk to the representative on the phone. I don’t recommend wasting your time doing that until you can tell them you have restored your ability to pay.
Credit card companies will threaten to file suit. They won’t. Read Bartman’s book. You can become delinquent more than 90 days if it takes that long to restore cash flow. Close to the 90 day mark they will be willing to cut all kinds of deals with you. If you take one of them know that they will not reactivate your card. I know the credit card companies will accept settlement at 50% of the amount due and take that over 3-5 monthly payments. They do not want you to know that. And as soon as I write that I am sure someone will say there are even better deals than that.
I am not advocating not paying what you owe. However, the credit card companies have no problems charging very high default rates and late fees. Your responsibility is to position yourself to go forward.
Get used to the phone ringing and don’t take it personal. First a computer is dialing and then at some point when you decide to talk with someone because you have a proposed solution then recognize they are not your enemy or your friend. They are simply doing their job.
You can expect the calls to start at 8AM and end at 9PM Monday through Saturday and noon until about 8PM on Sunday.
Mortgage or Rent
Because mortgages go through a foreclosure process it can take quite some time from start to finish. Rent on the other hand is a bit more dicey depending on the market you live in. The meltdown leading to the high foreclosure rate has driven up demand for rental units. So you could be facing a situation of eviction 60 days or so past the due date.
Generally if you are able to pay a portion of what is due that will buy some time. Mortgages move from the normal mortgage service department to a foreclosure processing department. Expect notice of intent to foreclose and calls. Don’t panic you have time. But keep moving on you go forward plan. Foreclosures and evictions do happen.
Brief Summary
What I have tried to do is paint the picture of what you can expect. There are variations of course and timing can vary depending on the credit card company and bank. Ultimately you have a lot of room to negotiate just about everything related to debt. Utilities no since they will just cut you off. But debt yes. However, in order to negotiate you must have something to negotiate with. You ultimately have to have a source of cash flow to negotiate.
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Steve Pohlit, Expert Business Consulting
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