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Cut your losses and keep your credit profile clean!

It is natural to experience good and bad things when operating a business. It can be business partners, suppliers, clients or simply results from bad business decisions.

If you believe in your business and have worked hard to get the business to where it is then sometimes you need to cut your losses.

Often as a specialist broker we see clients with adverse on their credit file. This means there is a record on their credit profile, business and/or personal that is detrimental to their growth. For example, outstanding court case, petition of winding down order and more commonly unpaid defaults.

Half the time it is as a result of mismanagement of finances within the business and the other half of the time it could be a dispute from an unfair business dealing. Whatever the case, this has a huge impact on the business as it will be extremely difficult to get finance to grow.

There was a case where a client operating a supermarket had a dispute with their supplier. The supermarket claim they should be given credit for items that has been invoiced and paid for but were collected by the supplier when it was unsold. In principle, our client had a valid case however the supplier took legal steps when the supermarket did not pay their recent invoice. This resulted in an advese record on the business credit profile noting an outstanding court case with an outstanding default for $5,000 and another outstanding default for $4,000 lodged by the debt collection agency.

For 3 years, this client could not get access to finance while defending his position in court for the outstanding based on good business practices and priciple. While this is admirable, the reality is it affected the business to grow financially.

After multiple attempts to obtain finance, they came to Sqale and realised that it was time to cut their losses and maintained progress towards growth.

After seeking the assistance of multiple brokers to no success, we assisted to help them obtain $100,000 in finance they needed to support the business into the busy year end season.

The key lesson here is to recognise objectively what your business need to succeed. Make strategic decisions to support your long term goals. Even if it means you have to bite the bullet and cut your losses.

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