With businesses, contracts are the lifeblood of a company. Late payments are annoying, but when invoices remain unpaid, eventually, a company cannot survive unless the accounts receivables are paid. When one business is owed money by another business, and really wants to get paid, it’s time to enlist our services at Mendes Weed, LLP. This article only covers business debts owed by one business to another, with regard to debts owing by consumers, that is covered in this article: Consumer Debt Collection.

Business debt collection starts when the parties begin negotiating with a credit application. The credit application constitutes a contract between the parties to the business transaction. Banking information, asset information, and other information pertaining to the assets of a company and its principal(s) taking out credit must be provided. When possible, getting the personal guarantee of owners or principals is a good idea, especially for unproven companies. Your credit application should notify the entity seeking credit that attorneys’ fees, interest rates, and costs on unpaid balances shall accrue. When arranging for goods or services on credit, the credit application may require all of the above prior to credit being extended. Until a business is established, it only takes one series of events for a business to fail. If that debtor business fails, without personal guarantees, debts are very difficult to collect. Until a business establishes that it pays its debts timely and in full, that its principals will guarantee the business’ debts, cash on delivery (COD) is always an option. Yet, there will always be the urge to extend credit to unknown or risky businesses just to meet sales quotas.

Let’s say, we are too late for a credit application, what happens then. Hopefully, the invoice provides for attorneys’ fees, interest on unpaid balances, and costs of litigation. Business customers often want to pay, but they have their own financial problems, say Coronavirus has overwhelmed that business due to a government-mandated shutdown. Some businesses simply like to delay all of their payments, and on the other extreme, some businesses will always go out of their way to avoid paying any invoices. With regard to the former, a late payment clause should be contained within the credit application and within the invoices. With regard to the latter, a litigation plan must be swift and strategic.

Unlike consumer debts, if a business creditor is in fear that the business debtor is in the process of hiding or depleting its assets, an attorney can start the collection of a business debt with a very effective procedure in the Courts. That procedure is called a Prejudgment Claim of Right to Attachment. What this procedure entails is “attaching” or freezing of money or assets that may exist in the debtor business right when the lawsuit is commenced. If the assets are “attached,” the asset is protected so that at the conclusion of the lawsuit, there will be sufficient assets to pay the creditor business.


If you need an attorney who is experienced in collecting business debts from other businesses, please give us a call at Mendes Weed. We help businesses get paid.

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Phone: 925.390.3222

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Mendes Weed, LLP is located in Walnut Creek and serves clients around the Bay Area. For your convenience, we also have offices in OAKLAND and Sacramento by appointment only.

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1990 N. California Boulevard
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Walnut Creek, CA 94596

 

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Oakland, CA 94607

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Sacramento, CA 95814

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