Not all customers are reliable for paying off their debts. A small business owner may not have the time necessary to vet a customer’s ability to pay debts on time. You need steady cash flow to keep your business, your livelihood, running. If you have a customer who refuses, or is unable, to pay his/her debt, you need to consider the methods of obtaining repayment.
Using the courts to receive payment
If all other methods of reaching out to a debtor have failed to produce any satisfactory amount, you may need to resort to more formal measures. Though collection agencies are popular choices for small businesses, they are fairly restricted in how they can pursue payment for a debt due to past abuses in the industry. Alternatively, a business owner can pursue several court-based resolutions against debtors:
- Small claims: Small claims courts resolve disputes of lesser monetary value. For New York, the limit on this amount is around $3000 for towns or village courts and $5000 for city courts.
- Lawsuits: A lawsuit is often necessary for larger monetary values of debt and more complicated disputes. If you prove your claim against a debtor, the court will enforce its decision against that debtor. Typically, a Sheriff’s Department can seize and sell any property that satisfies the debt.
- Liens: A lien is another method of ensuring payment if you can prove a claim against a debtor. This judgment can give you a legal claim to a particular asset(s) of the debtor. The property’s sale has to coincide with the payment of the lien.
Safer alternatives for debt recovery
In the future, secured transactions provide safer options for large transactions. By securing a debt with another tangible piece of property, the business owner has more power to leverage payments for a debt. You need to find an attorney with in-depth knowledge in collection work to identify the methods best suited to your business and credit profile. Your business is more than just your source of income; it is an extension of yourself. Don’t let irresponsible customers get away with failing to pay their debts.