Property (TCT) as collateral of customers

[boybi]

Why not have your customers BONDED instead?

TCT as colateral is also a risk. Pera ang Kailangan ninyo para sa kalakal na binenta, hindi lupa.

Your client can unload a non performing asset to you. When what you need is cash flow.

Will you take that risk?

Can you explain this BOND further?

[Ry_Tower]

Yes, I'll be the creditor/supplier. Lumalaki na kasi purchases ng ilang customers and nakakatakot na. I'm thinking of requiring them to give collaterals para mataasan ko sa credit limit nila.

Nice move!

[Phoenix67]

Yes, I'll be the creditor/supplier. Lumalaki na kasi purchases ng ilang customers and nakakatakot na. I'm thinking of requiring them to give collaterals para mataasan ko sa credit limit nila.

If they are selling it in cash....i suggest maghigpit ka na lang sa credit limit at collection nila. Lalo na king ang product mo is a low margin perishable commodity. Chances are, kaya sila lumalaki ang purchase is because they are getting bigger market share ... OR pinapaikot lang nila pera mo kasi relax kang magpautang sa kanila.

Aanhin mo ang colateral properties kung mawawala ang iyong liquidity. Even if magdefault sila at marepo mo properties nila, maapektohan pa rin negosyo mo dahil ang liquidity mo affected na rin.

Of course you can disregard my opinion kung ang product is a low input, high margin product (as in 300 to 1000% mark-up type).

[Sarsi]

Letter of credit will be the safest for you.

If they cannot get it from the bank, your other option will be your transaction frequency with your customer. Say, you deliver to them once a week with an average amount of 1M, make it twice or thrice a week at 300k or so. Negotiate that they can only have the next delivery if they pay the last one, or you gave them one outstanding balance. With ths, you can still grow your business with them and you minimize your exposure to them. Hold ang next delivery until they pay the last invoice.

That's our usual practice in the distribution business, also cash flow is more manageable.

[boybi]

Ang problem is majority of our customers e sa palengke. Will banks give them LCs?

We also limit the transaction kung lumalaki na ang utang. We wait for the next check to clear before we deliver their orders. Ang problema, the customer will buy from my competitor. Ayaw ko sanang maka-porma yung competitor dito sa area ko.

[vinj]

Ang problem is majority of our customers e sa palengke. Will banks give them LCs?

We also limit the transaction kung lumalaki na ang utang. We wait for the next check to clear before we deliver their orders. Ang problema, the customer will buy from my competitor. Ayaw ko sanang maka-porma yung competitor dito sa area ko.

Yeah, pag ganyan ang market mo then chances are you can't get LCs from them. Added cost din for the customer yan.

If there's one thing any businessman hates, it's idle cash. Do you require them to give you PDCs? Another thing you can look at is getting the principal of your customer's business to sign a Surety Agreement where he is personally liable to settle any debt obligations of the business (this allows you to go after personal properties if any litigation happens).

If you look at it, just as with lending, collateral is just a safety net really. It's your last resort when all else fails to help minimize your losses. Thus what really matters more is the relationship, keeping close tabs on buyers and knowing their true character (character is still the biggest factor when the Chinese banks evaluate borrowers). If you sense a little delay on payments, that's already a sign to look closer. If you see any external possibilities that may affect business, you start keeping a close watch and tightening deliveries just as well. Nothing's fool proof and it's all part of the risk of doing business, especially if you're in the distribution business. I've handled quite a number of distributors before and all of them have gotten hit at one point or another and what spelled the difference really is how they managed their exposure to their buyers.

[ab_initio]

Ang problem is majority of our customers e sa palengke. Will banks give them LCs?

We also limit the transaction kung lumalaki na ang utang. We wait for the next check to clear before we deliver their orders. Ang problema, the customer will buy from my competitor. Ayaw ko sanang maka-porma yung competitor dito sa area ko.

Hence, the LC is not the solution because it is drawn in accordance with the terms and conditions specified in the letter of credit. In your case the conditions of your transaction may vary from time to time. In importations, LC and escrow are traditionally resorted to.

Considering that you have competitors, all the more that you should have more control in the transaction. When the time comes that their unpaid debts ballooned, you won't see their faces because your competitor could still supply them.

[ab_initio]

Another downside for bonds and mortgage is that when the debtor defaults, the creditor always initiates the action. While when a debt is "secured" by a pacto de retro sale, the creditor will just sit and allow the time to pass by so he can consolidate the title in his name. This is not so in surety and guaranty. When the guarantor negates responsibility, you need to file a case in court. While in pacto de retro, the vendee a retro has the property so it is now incumbent upon the vendo a retro to challenge the same in court. It actually boils down to payment of, at times, unconscionable docket fees. In pacto de retro, the vendee a retro may set up a compulsory counterclaim. In compulsory counterclaim, you don't pay the docket and just the same your claims and defenses are adjudicated in the same transaction.

[tsupermario]

Another downside for bonds and mortgage is that when the debtor defaults, the creditor always initiates the action. While when a debt is "secured" by a pacto de retro sale, the creditor will just sit and allow the time to pass by so he can consolidate the title in his name. This is not so in surety and guaranty. When the guarantor negates responsibility, you need to file a case in court. While in pacto de retro, the vendee a retro has the property so it is now incumbent upon the vendo a retro to challenge the same in court. It actually boils down to payment of, at times, unconscionable docket fees. In pacto de retro, the vendee a retro may set up a compulsory counterclaim. In compulsory counterclaim, you don't pay the docket and just the same your claims and defenses are adjudicated in the same transaction.

In pacto de retro isnt it that you will have to transfer the title of the property to the name of the creditor? Kasi if not baka ma transfer sa iba. Wouldnt that be more expensive than a real estate mortgage?

[niwde11]

Ang problem is majority of our customers e sa palengke. Will banks give them LCs?

We also limit the transaction kung lumalaki na ang utang. We wait for the next check to clear before we deliver their orders. Ang problema, the customer will buy from my competitor. Ayaw ko sanang maka-porma yung competitor dito sa area ko.

thats why yung first suggestion ko is open deed of sale. pag ganyan talaga mga client mo parang di feasible ang mga bonds at yung ibang sinasabi nila.

[jon777]

Ang problem is majority of our customers e sa palengke. Will banks give them LCs?

We also limit the transaction kung lumalaki na ang utang. We wait for the next check to clear before we deliver their orders. Ang problema, the customer will buy from my competitor. Ayaw ko sanang maka-porma yung competitor dito sa area ko.

Some rural banks MIGHT give them an LC depending on previous bank transactions. Some rural banks are aggresive in expanding their business, some are very conservative.

Mahirap nga kung may competitor tapos mahaba din ang pisi niya. yan nangyari sa friend (friend A) ko selling hotdogs. pumasok ang isa pa naming friend (friend B) na mas mahaba ang pisi. na-pirate customers ni friend A, it only took 3 years for friend A to go belly up. Nalugi at nagsara. Ngayon, si friend B contemplating on closing the business since he got what he wanted already and that is to bankrupt friend A. Friend B is uber wealthy, well, not billionaire in dollar terms but in peso terms

Friends A and B fought because of a GIRL, can you imagine that....

[wowiesy]

Letter of credit will be the safest for you.

If they cannot get it from the bank, your other option will be your transaction frequency with your customer. Say, you deliver to them once a week with an average amount of 1M, make it twice or thrice a week at 300k or so. Negotiate that they can only have the next delivery if they pay the last one, or you gave them one outstanding balance. With ths, you can still grow your business with them and you minimize your exposure to them. Hold ang next delivery until they pay the last invoice.

That's our usual practice in the distribution business, also cash flow is more manageable.

tipong 1 up 1 down yan...

tutok lang talaga dapat sa monitoring dahil mabilis ang tendency na makalusot.. kung control mo ang paglabas ng stocks at delivery (strictly booking then delivery) then you have that control.. minsan minsan na lang sasablay pag may aberya sa delivery (say di tinanggap ang earlier booked item, instead of returning the item back to warehouse, ibenta sa ibang outlet)..

if you are a distributor na.. you can also offer to your principal a program.. tipong "risk placement"... you agree with the principal na mag iwan ka sa tindahan upto a pre agreed amount of items / inventory sa trade... shempre that amount is guaranteed to be paid by the principal na... worst case di na ma collect yung worth na yun.... kung ma kolekta... di nabawasan yung iclaim mo sa principal.. at least controlled sya upto that pre agreed amount... yung iba dyan magbabayad naman assuming na mabenta... yung iba.. talagang will take advantage... but the program is designed to have placement so that the end customer will have a chance at choosing your items sa tindahan... yan ang formula na ginawa ni Kopiko nung nagsisimula sila... I can just imagine the investment made on that scheme... if replicated across all palengke.. across the whole country... in say a period of 6 months to 1 year... laking puhunan... but now.. they are reaping the benefits na...