It’s not just homeowners, purchasers of new cars and other consumers who sometimes have to take out debt.
Frequently, businesses have to loan each other money as well. For example, a vendor may extend credit to a business that frequently purchases its goods. Sometimes, as part of a deal, one business might give another organization a promissory note.
In other situations, including the construction business, for example, it is just not customary for a business to take money up front. The business which does the work gets paid either at certain fixed points or at the end of the job.
Businesses operating in the Shenandoah Valley have to live with the reality that payment upfront isn’t always do-able. However, they also need to protect themselves against the possibility of a business associate not paying its bills when the bills come due.
When it comes to business debt, prevention and foresight are important
Of course, most managers of Virginia businesses realize that they should not deal with other organizations if there is a substantial risk that they will not pay their bills. However, this is easier said than done.
Even well-run businesses can run into financial problems. Unfortunately, many businesses also overstate their financial condition when asking for credit.
Businesses can also take appropriate legal steps to protect themselves. Aside from having a well-drafted contract, a business may also want to prepare a promissory note for their debtor to sign.
A promissory note makes a debt easier to enforce since there is rarely a question about how much the business owes. If properly drafted, promissory notes will state the amount owed, the amount of interest, and the terms of payment. The note also can specify the payment of attorney fees and costs.
Depending on their circumstances, other businesses may be able to take other steps to avoid uncollectible debts. For example, those in the construction business may be eligible to get a mechanic’s lien.
A business that will extend credit should consider a comprehensive legal strategy to make sure it is able to collect the money it earned.