Sample Reporting

Dear (client):

On November 18, just minutes after receiving your paperwork, collection efforts commenced right away against (debtor dba), which is a registered trade name under the corporation known as (debtor Inc). The registered agent is Mr. “X” (debtor) with an address of (debtor address). We know two years ago Mr. “X” (debtor) bought out his father. We are not sure if the corporate officer change is now reflected at the Oklahoma Secretary of State’s office.

Under close and intense questioning, Mr. “X” (debtor) divulged the following financial facts:

• $25,000.00 – Break even expenses
• $8,000.00 – Rent
• $2,500.00 – Utilities
• $5,000.00 – Payroll
• $100,000.00 – Trade debt
• $50,000.00 – Inventory
• $90,000.00 – Amount owed to the SBA
• $100,000.00 – Secured obligation to the bank
• $150,000.00 – Assessed value of home
• $15,000.00 – Equity in home
• Three months – when current lease expires
• 12,000 sq. ft. – physical size of operation
• $125,000.00 – Average sales before 9-11
• $25,000.00 – Recent month’s sales average
• Fifteen stores within one square mile
• Landlord – is also a furniture competitor
• Five employees – originally the business staffed thirteen

The thumbnail sketch of the debtor’s finances clearly shows that (debtor) is surviving day-to-day from hand-to-mouth. Unless his sales increase, he is not going to be able to make any progress on his obligations to the trade. The debtor admits being in a 2-year slump and blames this on 9-11. He is hoping for signs of a turnaround. Mr. “X” (debtor) states his business is located in the area known as “The Mile of Furniture.” Supposedly, there is no other concentration like this in the world – fifteen furniture stores in a one square mile area. Of course, you and your rep would know more about that. Mr. “X” (debtor) indicates (client) is the only “high end” line in the area and he wants to continue representing your company. He feels that (client) holds all the cards and if legal action was initiated Mr. “X” (debtor) believes this might be the beginning of his financial end. Of course, it is the debtor’s entire financial picture that is the problem – not your balance, which reflects only a fraction of the total debt.

You will note there is not enough inventory to cover the two secured positions (the SBA and the bank.) Your obligation is a corporate obligation meaning that you can only look to the assets of the corporation to satisfy the indebtedness. Mr. “X” (debtor) contends he will be renegotiating his lease in three months and that should free up cash flow. He is going to scale down and reduce the square footage.

The financial facts suggest that you may want to entertain a short-term payout predicated on a Promissory Note, whereby the debtor (and if married his spouse) personally signs the note. Default penalty provisions would be included. I will phone you in a few moments to discuss strategies going forward.