Hello everyone and welcome to Value Capital Funding’s podcast, “Insights Into Better Business Financing”.  My name is Jeff Kornfeld, and I’m one of the principals here at Value Capital Funding, a family-owned and operated, commercial financing & debt restructuring firm located in beautiful Boca Raton, Florida.  We’re here to bring you timely information and tips to help you navigate the vast, and sometimes confusing, world of small business finance.  

We invite you to contact us to discuss YOUR business’s financing & debt restructuring needs at any time.  You can reach us by phone at 800-944-6280 or visit us on the web at www.valuecapitalfunding.com, where we also index these regularly-produced podcasts in case you missed any of them, or if you just want to listen to any of them again.  So, without further ado, let’s start today’s show…

Today’s topic is:  Businesses Reopening, James Bond, & Your Lenders

It’s no secret that the Covid-19 pandemic has created a series of challenges that many businesses must carefully navigate since they’ve reopened and continue to try to get back to “normal”.  None of these challenges are more pressing than dealing with existing business loans, leases, missed payments and even defaults. In today’s episode of Better Business Financing, we’ll outline some of these current business conditions and provide additional insight into these vital issues, and maybe even show you how to best use the information to your advantage.  I’m excited about that folks, & I hope you are too…OK, here we go…

When the Covid shutdown began, as many of you know first-hand, most lenders issued moratoriums on normal debt repayment & even debt collection activity, and began issuing payment deferrals to customers on a very large scale.  Several state governors early on also issued executive orders reducing or eliminating a lender’s ability to collect on debts during the crisis. As a consequence, many business owners breathed a huge sigh of relief, and INCORRECTLY felt as though their financing firms were…”in their corner”

With most states reopened now, and many of the executive orders from those states’ governors expiring, many lenders have already started to aggressively pursue business debt collections. However, the chain of events that started due to the crisis has created a series of challenges that business owners must carefully navigate as the reopening gains steam and we all try to return to a more “business as usual” climate.

The regulatory environment is fluid so whether your lender relationships are with locally or nationally based firms, it’s critical for you to stay current on federal, state and local regulations. Currently, the District of Columbia and 4 other states are prohibiting involuntary repossession on assets used for collateral in a financing transaction.  The other 4 states are:

  • Massachusetts
  • Maryland
  • Illinois & Alaska.

Importantly, a number of governors of other states, while not issuing official executive orders, have asked lenders to “voluntarily cooperate and not to repossess collateral for secured business loans”.  There are other relief efforts underway in some states and local jurisdictions to place further restrictions on lenders. Most notably, in California AB 2501 would have restricted repossession activity on collateral used for business loans until the end of 2021.   Unfortunately, from the small business borrowers’ perspective, this initiative was defeated.  However, many think there will be more attempts to get relief for business owners – but there no guarantees. 

Finally, potential federal restrictions still do exist. Efforts have been made to formalize restrictions for repossession of collateral used for business loans during the debate around each of the Federal stimulus bills so far. With discussion of an additional stimulus bill currently underway right now, one has to assume that those efforts will continue.  But, where will that leave the unsecured borrower, the business owner who had to use MCA’s, or Merchant Cash Advances or other high-cost financing??  Are those secured, backed by collateral, or are they unsecured?? 

In most cases, the documents you sign DO take a general lien on all business assets. So, doesn’t a lien mean your financing was secured by that collateral?  How will your Merchant Cash Advances be treated given potential changes in the legislation? 

Now let’s talk about these business debt collection firms.  The current situation has resulted in some collection firms shutting their doors completely. Why is that?  Simple.  Because many were operating on very thin profit margins to begin with.  So, this sudden wave of collection moratoriums was the “straw that broke the camel’s back”, their back, and, some of them went, or will soon, go out of business.  This changes the landscape, and now we’ll show you why it may have just changed the landscape…for the better… FOR YOU! 

You see, the combination of fewer debt collection firms, and the expected surge in the demand for collection & repossession services across all industries, across the entire country, is likely to result in “capacity shortages” in some markets.  Follow along with me here please.  Many financing firms that you may already be dealing with will likely find it more difficult to get proper attention for their collection cases and will likely need to allocate more resources, which is code for money & time, to manage this issue than in the past.  That makes sense given the Covid-19 pandemic, right?

There are several factors in this Covid economy that are likely to increase the costs of collections for financing firms.  First, the imbalance between supply and demand that I just mentioned above will very likely increase cost pressure. Additionally, we are seeing an increase in consolidation activity among collection agencies, especially in certain large markets. They are merging with each other to get better scale.  Over time, this trend will translate into less competition amongst these firms who help YOUR financing firms collect money from YOU, which will likely up the fees they charge for their services.  And, finally, collection & repossession agencies themselves are experiencing increased costs relating to Covid-19.  When it comes to collection efforts relating to secured transactions, the proper handling and storing of business assets recovered in a debt repossession does cost more money.  Many are also charging higher fees to offset the cost of the required PPE, or Personal Protection Equipment they now need.  Also there are the higher labor costs associated with a slower collections process, even as it relates to collection activity for unsecured financing transactions like MCA’s and other high-cost debt that may very well be on YOUR books as we speak right now.  This all makes sense, right?  It’s a very fluid landscape.

It is also very likely that the Covid-19 situation will result in an increase in collection & repossession related lawsuits filed by customers against their financing firms. To be certain, we are already seeing evidence of a strategy emerging by attorney teams we deal with to target the issue on our clients’ behalf, especially in the jurisdictions where restrictions were issued and are already in place. This is why it is vitally important to stay abreast of all regulatory developments where your business operates.

The next several months will be challenging to say the least. So, it is important to make sure your internal team and your debt restructuring partners are ready to be proactive on your behalf. 

Are there any James Bond fans out there?  Because, I’m reminded of that great phrase by the insane villain, Elliot Carver, in the James Bond thriller, “Tomorrow Never Dies”, when he said, “never let a good crisis, go to waste…” 

So, how can you use this Covid crisis to your business’s advantage?

Listen up folks, because this is where it gets super interesting.  For all the reasons I just mentioned relating to Covid-19 crisis, the power to restructure your business’s debts has never been MORE in the hands of America’s businessowners, and LESS in the hands of the financing firms who debit your bank accounts on a daily and weekly basis. THIS is the time to follow Elliott Carver’s advice and “never let a good crisis go to waste”.

So, if you have high-cost debt on your books, whether it’s wildly expensive merchant cash advance debt, or any OTHER high-cost debt, NOW is the time to address it. YOU have the leverage. YOU have the power.  Why?  Because your lenders don’t want to chase you down in court or use a high-priced collection agency to do it.  Consequently, there are some of the BEST payment deals we’ve ever seen to be had now in the restructuring arena. 

Listen, we’re not telling you to profit off of the pandemic.  It is a tragedy on a global scale. That being said though, as debt restructuring professionals who look at these scenarios all day long, we’re trying to respectfully convey to you that despite the fear you may have, the trepidation you may feel, even the embarrassment that may nag at you, NOW is the time to address your business debt, to lower your debt payments, and to breathe new life into your business.  So, take a deep breath and hold it for a second.  Now exhale slowly.  Because, I’m here to tell you that it IS going to be OK.

The Covid-19 environment has just worked to your advantage, at least when it comes to restructuring your business debt.  Because what’s that other saying? “When life gives you lemons, make lemonade”.  Right?  Well, here’s YOUR chance…

Take care of yourselves, your families and your loved ones.  And, then, please take care of your business, because America NEEDS our small businesses healthy and strong.  We need you and yours healthy and strong.  We are lowering our clients’ debt payments by an average of 40% – 60% while preserving their personal and business credit so, if we can play any role at all in helping YOU restructure YOUR business debt, please do keep us in mind.  All inquiries are, of course, 100% confidential.  And we can generate a customized Offer Sheet within just 24 hours to show you what your new, dramatically lower payments will be.

And to help small businesses nationwide, we’ve instituted our Restaurant Gift Card Program.  If we generate a customized Offer Sheet for you, whether you become our client or not, we will give you a $100 restaurant gift card to a restaurant of your choosing in your local community to help out that hard-hit sector of the Covid economy.  It’s a win/win situation for us all.  Just use the link you see here to learn more.

Well…that about wraps it up for today folks.  Thanks for listening to Value Capital Funding’s podcast, “Insights Into Better Business Financing” with me, Jeff Kornfeld. 

We invite you to contact our dedicated group of professionals to discuss YOUR business’s financing & debt restructuring needs.  You can reach us by phone at 800-944-6280 or on the web at www.valuecapitalfunding.com.  

Value Capital Funding.  We don’t accomplish the impossible…We only accomplish what SEEMS impossible!  We hope you tune in again next time everyone!  Bye for now.