October 2011 Business Credit Journal

7931 NE Halsey, Suite 200 • Portland, Oregon 97213 • Tel 503.257.0802 or 800.622.6985 • Fax 503.257.0247 • www.nacmoregon.org

NACM Oregon Business Credit Journal OctOber 2011

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In This Issue

Double Dip ...........................1

Chair’s Message ....................2

President’s Message ..............2

International Corner ..............3

Member Profile .....................4

New Member Introductory .....6

CFDD Portland Recipients ......8

NOF Scholarship Funds .........9

Education Schedule ...............10

BCLC Webinars .....................10

Credit Techniques .................11

Contacts ..............................14

Double Dip Recession on the Table? Consider Credit Enhancements to Minimize Credit Riskby Scott Blakeley, Attorney, Blakeley & Blakeley, LLP

The US GDP for the first and second quarter has been revised

downward. The stock market and credit markets have been extraordinarily volatile, raising whether investors are pricing in an economic downturn. Many economists are revising US GDP downward for Q3 and Q4, possibly carrying into 2012. For the credit and financial professional, the most recent economic data may be red flags to reevaluate credit risk, whether with existing customers or new applicants. Even with the prospects of heightened credit risk, the credit and financial professional is still working with sales and management to make the sale.

Some credit enhancement tools to add to the credit and collection policy may include a more refined credit application or supply contract, with terms and

conditions that may better keep the customer focused on staying within terms by having penalty provisions in the application. Likewise, credit enhancements, ranging from standby LCs, to guarantees (personal and corporate), credit insurance and security interest in the vendor’s goods or the customer’s assets may achieve the reduction in credit risk to allow the customer receive the vendor’s product or serve on credit terms.

Credit Enhancements Looking for a Guaranteed Payment from your Insolvent Customer

Effect of Bankruptcy on Credit Enhancements/Alternative Payment

Credit Enhancement or Payment Mechanism

Avoidance Action (Preference, turnover action, fraudulent, conveyance, strong arm powers)

Automatic Stay

Letter of Credit No No



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Message from the Chairman Summer seemed to slip away. I spent this last weekend digging up potatoes’, harvesting the corn, making zucchini bread, and assessing if my tomatoes will ripen enough before fall sets in. Being a credit manager, it’s that time of the year that we look at how our year has gone, what were our successes, and what do we still have left to do to finish the year. Like my tomatoes trying to ripen, what else can I do to get the most out of resolving my AR issues? NACM Oregon still has an array of educational offerings scheduled for this Fall. Many Live Webinars are scheduled for October and November as well as the Annual Member Breakfast scheduled for October 26 with guest speaker, Economist, John Mitchell, at 7:30 a.m. at the Doubletree Lloyd Center in Portland. A complete schedule is posted on the NACM Oregon website. Just a reminder the NOF offers scholarships for full-day seminars on first-come, first-served basis. Many are still available. For more information, you can contact the NACM education coordinator, Elizabeth Heintz, at 971.230.1120 or 800.622.6285 extension 120. Enjoy what’s left of our warm sunny days, and thank you for your continued support of NACM Oregon.

Raeann Binau, CICP Airgas - Norpac Inc [email protected]

Message from the President September, back to school month, was a busy one for NACM Oregon. We offered “Building Blocks of Credit” as the intro course for those new to credit and a good review for others. In January we will offer a series of half-day classes on different aspects of Collections. I hope you’ll plan to join us. The NACM Trade Credit Report continues to grow by leaps and bounds. San Diego and Norfolk came aboard in September, and Seattle and Minneapolis are scheduled to join the database this month. In the next few months, we will make a series of additions to the report. As you may know, we’ve begun verification of legal organization in the last few months. This means more and more reports have information about the State and date of registry, assumed business names, and other corporate filings. In the fourth quarter, alerts and NACM collection agency experience will be added to the reports. In the first quarter of 2012, financial statements from the IRS will be available (for an additional fee). While the focus of the reports will continue to be current trade experience, we are adding supplemental information of interest to trade creditors as it becomes available. Haven’t tried it? Call your Account Executive or Customer Service with a half-dozen names and let us provide complimentary sample reports.

Rod Wheeland, CCE, CAE Direct: 971.230.1158 [email protected]

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mailto:rwheeland%40nacmoregon.org?subject=



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International Cornerby Alice Knight

Many of us are guilty of talking about “risk” and “risk mitigation” as if it were one specific challenge that can be addressed with one approach. In the reality of international business “risk” has many different forms and mitigation techniques. These types often overlap but it is important to identify the specific types in order to make effective business decisions.

I have arbitrarily grouped “risk” into four general categories of:

1. Risk of nonpayment. 2. Risk of slow payment. 3. Risk of claims or deductions. 4. Risk of loss of market share.

RISK OF NONPAYMENT This is usually the first risk that comes to mind when dealing with any customer credit and doubly so when dealing with a customer in another country.

Potential Mitigation Tools1. A thorough country risk analysis identifying any potential roadblocks for payment including currency controls, exchange fluctuations, and the overall economic and political stability of the country.

2. A thorough customer credit analysis including a credit report, financials for amounts above a set threshold, current information from industry groups and input from agents, distributors or offices in the field.

3. Secured payments including Letters of Credit, Documents against Payment, AVALS, Letters of Guarantee, etc.

4. Credit insurance.

5. Factoring or Forfaiting.

All of these tools involve time and money. Each company must evaluate their own appetite for “risk” and the cost they are willing to absorb to mitigate this risk.

RISK OF SLOW PAY In the current economic climate this category is critical for many companies. Slow pay is directly related to the other three categories but is distinct in some ways.

Potential Mitigation Tools 1. Items (1) and (2) above. Particularly note any country problems that might delay payments and any customer history of delays.

2. Letters of Credit and AVALs are the most help to enforce agreed payment terms. A Letter of Credit will be honored on the specified date IF all conditions specified are met. AVALs, depending on the country, are much the same.

3. Customer contact and follow up is vital. Verify that the customer has received the goods in good order and that they have all the information needed to pay you as agreed. If they are paying by wire transfer be sure that they have your bank information.

4. For smaller companies confirm that the payment signer will be available when the payment is

due.

5. Watch the exchange rates particularly if your customer does not hedge. We can often predict a slowdown in payments from Mexico when the peso weakens.

6. Know your customer so that traditional slow pays get extra, early attention.

Next month we’ll discuss the last two categories and explore how they all fit together and how sometimes the mitigation tool for one conflicts with another.

Alice Knight is Vice President of Finance & Administration for Paper Products Marketing, Inc. Ms. Knight has more than 45 years' of experience in International Finance and is an active member of ICTF and NACM. She has served as Co-chair, Panel Member and Presenter at Annual Global Conferences, as President of FCIB Forest Products Group, and participated in FCIB Conferences in Mexico, Puerto Rico, Munich, and Brussels.



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Member ProfileChown, Inc.

It’s not often the opportunity comes along to talk to the head of a company that has been run by the same family for more than 130 years. The opportunity becomes reality when talking to David Chown, the CEO of Chown Hardware, which just celebrated its 132nd year of business on September 15. It was on that date in 1879 that David Chown’s great grandfather, F.R. Chown, opened a hardware store around 1st and Main in downtown Portland (the exact location is unknown). There were just 17,000 people living in Portland at the time and Oregon was in the infancy of statehood. “It was just your typical hardware store,” says Chown, downplaying the fact that due to its central location his great-grandfather’s store may well have been the hardware store of young Portland. Chown customers back then could buy everything from hammer and nails to saddles and tack. David’s grandfather, D.B. Chown, took over 1918 and watched the goods on the shelves change with the times. Saddle and tack made way for paint and sporting goods. In fact, in the 1930s Chown Hardware sold more hunting and fishing licenses than any other licensing establishment in the state. The days that sporting goods graced the shelves are long gone at Chown, but it illustrates the owner’s flexible approach to business. As David explains, “We’ve sold whatever we could over the years in the vein of being a hardware company.”

continued on page 5

When David’s father, Frank Chown, entered the business in 1945 he had a chance to practice some of his own ideas about the direction of Chown Hardware. Seeing the explosion hitting the construction industry, Frank saw the opportunity to expand a current niche: door hardware. He developed Chown’s commercial door hardware division until it became one of the largest in Oregon. David uses his father’s example to illustrate a practical business philosophy at Chown. “We find our niche and we take the time to dig it as deep and make it as wide as we

Three bothers with their parents. From l to r: David, Fred, and Steve; Frank and Eleanor Chown.

can.” When he and his brother Fred took over the reigns in 1986, they continued to practice their father’s philosophy by building on the door hardware foundation. As technology became more involved with access control—and more available—Chown took the natural step to expand beyond commercial door hardware. They began providing customers with electronic access systems and high definition video monitoring as well. “Now Chown can take customers from a single door lock to a whole system that covers their entire building and



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Member Profile, continued from page 4

everything in between,” he says. This is exactly what they’ve done for local customers like Nike, Intel, and the Oregon Convention Center. In fact, Chown Hardware may sound familiar to some Portland locals, as they were the company that donated the high definition security cameras to Skyline School in an effort to prevent a repeat of the tragedy that befell Kyron Horman. But Chown Hardware isn’t all about commercial access control and high-tech gadgets. Stop by their northwest Portland showroom (or the Bellevue, Washington, showroom) and you won’t see card readers or security cameras. You will see latches, doorknobs, deadbolts, sinks, toilets, and plumbing fixtures in every shape, style, and flavor. It is this curated diversity that Chown Hardware is so well known for among remodelers, interior designers, and do-it-yourselfers. “You can wander through the showroom and come up with some great ideas on how you want your home to look,” David says. Yet the hardware and fixtures—from shiny chrome to dull stone—is backed by a deep well of professional experience. “We’ve been around longer than most of the manufacturers we sell,” he says with a chuckle. Constantly chasing a moving target is how David describes providing high quality boutique finish hardware. But he admits that the dynamic of change is what makes it so fun. “There are always new designs. There are always new ideas,” he says. “Back in the 1950s every toilet looked the same, every faucet looked the same. Now there are an infinite number of designs, materials, and styles. Virtually anything you want to do with your house you can do.”

David Chown, Owner, and Kaye Powell, Vice President

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It is our goal to make sure every member is aware of services offered through your NACM Oregon membership. Whether you are a current Experian user, utilizing another vendor, or not accessing credit reports at this time, please consider reviewing this new product.

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Thank you for your consideration.

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Commonwealth Plywood Co.Brigitte Parent450.433.4681 15 Boul Labelle Ste-Therese, QC J7E 4H9

Founded in 1940, Commonwealth Plywood Co., is a fully integrated forest products company engaged in the management and harvesting of prime forest reserves. The company owns and operates 7 rotary veneer mills, 8 bandsaw mills, 3 plywood operations, 2 specialized veneer splicing mills, a portable chipping plant, 3 dry kiln operations, 1 flooring plant and 18 distribution warehouses in Eastern Canada and the U.S.

Micron Semiconductor ProductsLynn Gordon208.368.3730 8000 S Federal Way, MS 1-157 Boise, ID 83716

Founded in 1996, and based in Boise, Idaho, Micron Semiconductor Products, Inc., manufactures semiconductors and also offers sales and support services for semiconductors. Its products include DRAM, DRAM modules, NAND flash, NOR flash, and phase change memory. Micron Semiconductor Products, Inc., operates as a subsidiary of Micron Technology Inc.

Northwest Tire FactoryHoward Swanson503.283.6494 6102 N Marine Dr. Portland, OR 97203

Tire Factory was started in 1987 as a member-owned business to supply independent tire store owners with buying power for tires. It has grown to over 200 stores in fifteen western states with Regional Distribution Centers in Portland, Oregon, and Salt Lake City, Utah. Each RDC is approximately 120,0000 square feet which supplies the stores with tires, store equipment, and supplies. In May 2011, Tire Factory added an additional RDC in Denver, Colorado.

Silver Mountain Christmas Trees Inc.Shirley Heater503.769.7127 4672 Drift Creek Rd., SE Sublimity, OR 97385-9764

The Silver Mountain Christmas Tree Nursery is the newest and largest Conifer Seedling Nursery in the Pacific Northwest. Family-owned and -operated by Jim and Shirley Heater, the land has been in Jim’s family since his ancestors traveled the Oregon Trail in the mid-1800s. Today, the company grows a little more than 3,500 acres of premium Noble fir, grand fir, fraser fir, and douglas fir trees, shipping 300,000 to 350,000 trees a year.

New Member IntroductionNACM Oregon extends a warm welcome to the following new members:



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Terreault Joins the New Credit Professionals Group Planning Committee The Oregon-Southwest Washington Chapter of RMA (Risk Management Association) and NACM Oregon would like to congratulate Brenda Terreault, JD, CBA, Collections Services Manager, NACM Oregon, on her appointment to the New Credit Professionals Group Planning Committee.

The New Credit Professionals Group is primarily for new bank professionals and offers educational classes that explore credit topics relevant in today’s commercial banking environment. The series provides new professionals the tools to add value to their clients’ banking experience.

Brenda is a presenter at the upcoming class, “How to Help Borrowers Reduce Slow Pays and No Pays.” The series will take place at the Lucky Labrador Brew Pub, November 3, 2011, 3:30 - 5 p.m.

Cost: $10

For additional information please contact Chris Bradley at [email protected] or Kristin Timm at [email protected].

Weisman Appointed to the NACM National Board Rick Weisman, CCE, has been appointed Director, Western Region to the Board of Directors of the National Association of Credit

Management (NACM), effective January 1, 2012. Rick has been a Graybar Financial Manager since 1982. During his tenure, his territories have included Alaska, Washington, Idaho, Oregon, and Hawaii.

While located in Spokane, Rick was an active member of NACM Inland Northwest, where he served on several committees. He was a member of the Board of Directors from 1986 through 1995, and served as Chairman in 1995.

Graybar relocated Rick to Portland in 1995, and he has been an active member of NACM Oregon since his arrival. He has served on numerous Association committees, with a special commitment to Membership. Rick was elected to the Board of Directors in 1999 and and served as Chairman in 2004.

Rick earned the Certified Credit Executive designation in 2003. He has assisted NACM Oregon as an instructor for “Introduction to Credit” and “Good Morning Credit!” classes. He also has participated in a CFDD Portland seminar as a panel member.

Rick has been a strong, contributing member of Electrical Suppliers Industry Credit Groups in Seattle, Spokane, and Portland since 1979. He has chaired groups in Spokane and Portland.

Rick is a committed and active member of NACM Oregon and his industry credit group. All who come in contact with him value his commitment and his professional approach. He has been recognized by NACM Oregon with the 2004 CCE Designation of Excellence Award and the 2005 Credit Executive of the Year Award.

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Congratulations to CFDD Portland Chapter 2011 Recipients

Outstanding New Member Award Kathleen Victoria is the Corporate Credit Manager and SOX Compliance Coordinator of Kyocera Industrial Ceramics Corporation (KICC). Kathleen earned her Bachelor’s in Accounting from the University of Washington’s Milgard School of Business 2006 and is currently preparing to return to school to obtain her Masters in Accounting from Washington State University. Kathleen was a member of NACM Oregon from 1996-1998 and chair of the Electrical Wholesale Industry Trade Group in 1998. In 2010, she renewed her membership with NACM and joined the CFDD Portland Chapter. She quickly became a familiar face to the chaper membership by attending the monthly education meetings and asking how to become more involved. As a result, Kathleen signed up to participate on four committees this year, including service as this year’s Publicity Chair. This is definitely the way to jump start your involvement in CFDD. The Outstanding New Member Award was created in 1990 to acknowledge and recognize an integral member of the CFDD Portland Chapter who shows tremendous potential within their first two years of membership. As a newer member, the award criteria primarily focus is on attendance at monthly meetings, participation and involvement in committees, and adding an exceptional benefit to the Portland CFDD Chapter entire membership. Kathleen has clearly defined herself as an active and participative member of our CFDD family. Congratulations, Kathleen, as the 2011 CFDD Portland Chapter Outstanding New Member Award recipient!

Distinguished Member Award Jackie was born in Vancouver, Washington, but raised in the Tillamook area. While working for Tillamook Hospital, she also had another job on the side as a bookkeeper for a doctor. That’s where she was introduced to the world of accounts receivable. Jackie later moved to the Portland area and worked for Good Samaritan Hospital as a cashier and a Medicare billing specialist. In 1972, Jackie moved to Vancouver and started working for Puckett Aviation and Airport Inn as their bookkeeper. She married one of the owners and raised four children. They eventually sold the airport, moved to Pekin Ferry Moorage in Ridgefield, and learned how to run a boat moorage. In 1980, her husband passed away and she began shooting pool to deal with the stress. This is where she met Bonnie Hansen, credit manager, for Cadet Manufacturing. A deal was made; Jackie would work for Bonnie to get caught up and if Jackie didn’t meet expectations she would leave within the first two weeks. In 1985, Jackie was hired by the company. Jackie jokes that she got her job over a pool game. Bonnie moved up to HR and Jackie was named the credit manager for Cadet. Jackie has been a member of CFDD since 2005. She has served on the Board for many years, most recently as the Chapter Treasurer the past four years. This is the first year since 2005 that she has not been on some committee or on the Board. Jackie has always been a friend and a supporter of the Portland Chapter. Over the years, her donations and those on behalf of Cadet have supported the chapters efforts in fund-raising for scholarships. She is always willing to help anyone and to serve the chapter with the best intentions at all times. Jackie is the first with a smile and a laugh, even at herself. She is looking forward to retirement within the next 5 years. The CFDD Portland Chapter proudly recognizes Jackie’s tremendous contributions during the past six years. She was nominated from within our chapter’s membership and consistently epitomizes the best attributes that define a distinguished member. Please congratulate Jackie Meyers from Cadet Manufacturing as the 2011 CFDD Portland Chapter Distinguished Member Award recipient.

Kyocera staff pictured left to right: Lisa Owens, Kathleen Victoria (DMA), Judy Duncan, Carol Pajala, and Pat Cotter, Vice President of Finance & Administration.

Jackie Maze with daughter, Angie Lesperance.



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NACM-Oregon FoundationThe NACM-Oregon Foundation grants scholarships to credit professionals for continuing education, professional designations, and conference expenses.

The Foundation manages two scholarship funds: the NACM-Oregon Scholarship Fund and the Phylliss Clark Memorial Fund. The Foundation offers scholarship to the following events:

• All NACM Oregon educational courses• Portland Community College courses within the Credit Administration and Advanced Credit Administration Programs in preparation for professional designation• Self-study courses in preparation for professional designation• Registration and exams fees for the National NACM Professional Designation Program• NACM/CFDD Pacific Northwest Credit Conference• National Credit Congress and Exposition• NACM National schools such as Credit Management Leadership Institute, Mid-Career School, and the Graduate School of Credit and Financial Management

If taking a course or pursuing your certification seems like an expensive proposition, think again. These scholarship funds are a benefit to you as a member, so please take advantage by applying for next year.

To apply—

To apply for scholarship funds, or for more information, contact Lourdes (Lou) Rice, NOF Scholarship Committee Board Director, Pacific Metal Company at 503.454.1051 or [email protected].

Submit applications to:

Lourdes (Lou) A. Rice NOF Scholarship Committee Board Director Pacific Metal Co. 10700 SW Manhasset Dr. Tualatin, Oregon 97062p: 503.454.1051 f: 503.454.1065 e: [email protected]



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2011 Education Class Schedule

RegistrationTo register for on-site classes, please visit www.nacmoregon.org/events. Go to the current course schedule, then click on “view details” to register. If you have any questions regarding these classes, please call Elizabeth Heintz at 971.230.1120 or email [email protected].

Preventing and Detecting Fraud October 12 2011, 3:30 - 5 p.m.CEU: .15 Embassy Suites at the Portland AirportComplimentary to NACM Oregon members; $95 - nonmembers Speaker: Nancy Young, CPA, CISA, CFE, MBA, Moss-Adams, LLP

NACM Oregon Member BreakfastOctober 26 2011, 7:30 - 9 a.m.CEU: .15, Course Level: I Location TBD$35/member, $65/nonmemberEducational Session: Economic UpdateSpecial Guest Speaker: John Mitchell, Economist

Other Activities

NACM Oregon Open HouseDecember 14, 2011, 4 - 7 p.m.NACM Oregon Classroom

Course LevelsC (core) – Classes that focus on credit concepts, techniques, and practical tips. They are designed for the newer credit department employee and the more experienced credit professional looking for a review.I (intermediate) – Classes assume basic knowledge of credit concepts and address specific issues and approaches to resolution.A (advanced) – Classes that assume significant knowledge and experience and address complete topics of interest to credit and financial professionals.

2011 Business Credit Learning Center Webinars

Source & Application of Funds The Real Measure of Cash Flow October 11, 2011, 9 - 10 a.m. PT

Practical Tools & Tips for Managing Deductions October 12, 2011, 12 - 1 p.m. PT

Credit, Cash & Collections: The Lifeblood of the Business October, 18 2011, 9 - 10 a.m. PT

Basic Credit Management Webinar Series—Why Accounting Principles are Important October 21, 2011, 9 - 10 a.m. PT

Building Relationships to Get Paid October 27, 2011, 9 - 10 a.m. PT

Webinar fee: $79 each - member; $109 each - nonmember

For a complete list of webinars and descriptions, please visit www.businesscreditlearningcenter.com.

If you have any questions on any of the webinars, call Elizabeth Heintz at 971.230.1120, or [email protected].

Schedules are subject to change.

http://www.nacmoregon.org/events

mailto:eheintz%40nacmoregon.org?subject=

http://www.businesscreditlearningcenter.com



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Credit TechniqueNever Never by Michael C. Dennis

Tips on Never-Never—

• Never force a new collector to learn on the job.

• Never allow a collection agency to make decisions about accounts placed with them on behalf of your company.

• Never tell a customer that you will place an account on hold if you cannot or will not follow through on that threat.

• Never bring up race, gender, religion, ethnicity, age, or national origin in your collection calls.

• Never call a customer a liar. Instead, discuss the fact that a commitment was made and then broken by that person

• Never exclude your salespeople from the credit decision-making process.

• Never choose a third-party collection agency on cost alone. There is no free lunch, and you usually get what you pay for.

• Never falsely claim or threaten that your company will seize, garnish, or sell any property or other assets of the debtor company.

• Never forget that debt collection is only one aspect of an ongoing business relationship with customers.

• Never provide false or misleading credit information about a debtor to a credit bureau—no matter how troublesome the debtor was or is.

• Never guess about how a customer wants their payment applied. Guessing often creates a significant amount of work for accounting personnel and often delays collection efforts.

• Never lose sight of the fact that the credit department’s goal is to collect quickly while maintaining positive working relationships with customers.

• Never make a concession during a collection discussion without getting one in return. In other words, do not make unilateral concessions.

• Never make business decisions when you retasked with making credit risk management decisions. There is a basic distinction between the two which can be summed up in the following statement: Not every good business decision is a good credit decision

• Never mirror a customer’s unprofessional behavior.

• Never put off until tomorrow a collection call you could make today.

• Never rely on written correspondence to collect from delinquent customers. The best ways to collect are in person, and the most cost effective is by telephone.

• Never schedule discretionary meetings during collectors’ prime calling times.

• Never sugar-coat the truth about a subordinate’s substandard collection performance.

• Never threaten or hint about action you might take that is unlawful.

• Never avoid a collection call because your customer is ‘too difficult’ to work with.

• Never make a call without taking notes.

• Never end a call without knowing the name and title of the person with whom you have been speaking.

• Never apologize for bothering a customer when calling about a past-due balance.

• Never ask for anything less than payment in full of the entire past-due balance.

• Never assume that your company needs the customer’s business any more than they need the ability to purchase your products on open account terms.

• Never fail to ask for a better payment commitment than the one originally proposed.

• Never deal with intermediaries. Speak to decision makers.

• Never forget your primary role is as a negotiator, not a note taker

Watch for the “Sometimes” issue next month.

Michael Dennis is a business credit consultant, speaker and webinar presenter. He is also the author of “1001 Collection Tools and Tips.” His website is at www.coveringcredit.com.

© 2011. Michael C. Dennis. All Rights Reserved. Mr. Dennis can be reached by email at: [email protected].

www.coveringcredit.com

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Certificate of Deposit (at transaction outset)

No Yes

Guaranty Possibly Possibly

Purchase Money Security Interest No Yes

Junior Security Interest Possibly Yes

Consignment Possibly No

Credit Insurance No No

Put Option/Option Contract No No

Factoring No No

Credit Application No No

Restructuring Agreement Possibly Yes

Stopping Goods in Transit No No

Reclamation Possibly Yes

Offset Possibly Yes

Credit Card No No

Critical Vendor No No

Postpetition Return of Goods No Yes

Selling Claims No No

Credit Card No No

E-Checks/Checks by Fax Possibly No

Credit Enhancements—1st Installment

Personal and Corporate Guaranties, by Bradley D. Blakeley, Esq.

Bill Gross’ statement that the decline in Treasury yields to 60-year lows “reflect a high probability of recession in the United States” is the latest edition to the increasing sentiment that the U.S. is heading back into a recession. The reasons are many—from persistently high unemployment, the dismal housing market, the debt crisis (in both the U.S. and Europe), to concerns over a variety of bubbles in China—and pressure is now on the credit professional to prepare for the worst. This post is the first installment in our series on credit enhancements that aims to educate and inform the reader on what alternatives can be used to protect credit sales. The series includes enhancements such as guaranties, credit insurance, consignments, letters of credit, bankruptcy swaps, certificates of deposit, credit cards, factoring arrangements, secured transactions, and alter-native forms of credit arrangements. A guaranty can be defined as a promise by a guarantor (often a principal of

the customer or customer’s affiliate) to carry out the primary obligor’s (customer) commitment to the prom-issee (seller). There are also two types of guaranties. The first is a guaranty of payment or collection, in which the principal amount is due at a specified date. The second is a continuing guaranty, which covers future dealings over an unspecified length of time. A personal guaranty must be in writing and should include a statement that the signing party is personally guarantying the debt of the customer. The full legal name and fictitious business name of the customer should be stated, and the guaranty should also include, under the signature block line, the individual guarantor’s social security number and home address. The creditor should also consider requiring the guarantor to notarize the guaranty. Ordinary rules of offer and acceptance under the law of contracts apply to guaranties. Unless notice of acceptance is expressly required, an offer to become a guarantor may be accepted by performance or by acceptance of other consideration. Note that a creditor’s right to enforce a contract of guaranty must be based on knowledge of the existence of the guaranty and the credit must be extended in reliance thereon. The benefit of having another party responsible for payment is the primary purpose of a guaranty and usually come into play when our customer defaults. But what happens if we are paid by our customer, and the customer files bankruptcy within 90

Recession, continued from cover

...continue on page 13



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Guaranties, continued from page 12

days of making the payment? Can the creditor recover the preferential transfer from the guarantor? The short answer is yes. If we encounter another surge in corporate bankruptcies, the principal of revival could provide the creditor with a way to keep its money received from the sale. This occurs when the customer files bankruptcy and the party pursuing the preferences makes a claim to avoid and recover a transfer that was guaranteed, and the creditor is forced to return the preference. Fortunately for the creditor, bankruptcy courts recognize that the obligation under the guaranty is revived and preference returned, including attorneys’ fees and interest, must be repaid to the creditor by the guarantor.

Watch for the 2nd Installment— Cash-in-Advance & Cash-on-Delivery in next month’s issue.

Reprinted with permission from the August 2011 Blakeley & Blakeley Vendor Flash.

© New Yorker Cartoon 1993 James Stevenson from cartoonbank.com. All Rights Reserved.



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Board of Directors NACM Oregon

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ChairmanRaeann Binau, CICP Airgas - Norpac, Inc. [email protected]

Vice ChairKimi Shelton-Muller, CCE EKC Consulting, [email protected]

SecretaryJohn Hardy Emerson Hardwood [email protected]

TreasurerMarsha Johnson, CCE TEC Equipment, [email protected]

CounselorSue Hein Rapid Bind, [email protected]

Customer Service/ Credit Reporting971.230.1220 [email protected]

Data ContributionShannon Abnal 971.230.1166 [email protected]

Member Services Kathy Linscott 971.230.1164 klinscott@nacmoregon

Member Services Account Executive Denise Redding 971.230.1178 [email protected]

National Account Executive Caroline Anderson 971.230.1178 [email protected]

Collection Account ExecutiveClara [email protected]

EducationElizabeth [email protected]

Directors Steve Amiel Electrical Distributing Inc./[email protected]

Linda Bishop, CCE, CICP Tektronix, [email protected]

Will Campbell Standard Supply [email protected]

Tony Ceniga Industrial Finishes & [email protected]

Paula Cooley, CBA American Steel [email protected]

Lori Jones, CCE Eoff Electric Supply [email protected]

Pat Swope, CCE, CICP Pacific Seafood Co., [email protected]

PresidentRod Wheeland, CCE, CAE NACM [email protected]

Industry GroupsRichard Browning 971.230.1188 [email protected]

Kristen McBride 971.230.1176 [email protected]

Collection ServicesBrenda [email protected]

BillingMarmie [email protected]

Meeting Room RentalElizabeth [email protected]

Newsletter EditorBarbara Salazar971.230.1182 [email protected]

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