If your business is behind on its bills, sooner or later someone will offer to make that debt shrink. Offerings like this get a lot of attention because a desperate small business owner is an enticing target. The designers of these operations aim for business owners who have a lot of debt and think there is an easier way out of their problems. For those business owners there is no easy out, the magic does not exist. What exists is an advance fee charged before any work is done.
In one example, it’s as simple as sending a letter. In late October 2016, the FBI arrested a Ukrainian-born man named Sergiy Bezrukov in upstate New York on mail fraud charges. Using aliases such as John Butler, Thomas Paris and Christopher Riley, he allegedly sent mass mailings to business owners offering to help them cut the amount they owed creditors by as much as 75 percent, in just six to 12 hours. Business owners who contacted him were instructed to wire an advance fee of $1,250 to his firm, Corporate Restructure Inc.
According to the charges, more than 100 business owners responded to Bezrukov’s advertisements. Together they sent him more than $500,000, and no work was ever done for any of them. The fee was only the first loss.
The Company’s Late Payment Status Is Quickly Worsened
For many, the moment your bills are late is the moment a crisis hits. A business that answers a letter like this is usually already behind, and its late payments are already on record at reporting agencies like Experian. Owners waiting on the promised relief figured one missed payment would not matter. Except they missed the next payment. And the one after that. And so on. Add to that the delay caused by the bogus ‘debt relief’ service, and the company’s late payment status is quickly worsened. The result is that their credit score has dropped even further, and their account reports look more and more problematic. The small business owner now has the added expense and stress of the wasted money, the bad credit, and also the worsening cycle of late payments.
Part of the problem is that this is a business where all you need is a phone and a list. You do not need to be an attorney. You do not need to have a fancy office or sign a letterhead. You do not need any special training or industry knowledge. You can set up and operate a bogus ‘debt relief’ scheme in your own home. There is no gimmick here, no mystery. It is just plain greed. The same problem turns up on the other side of the ledger, with fly-by-night collection agencies that pitch lenders on wild claims of what they can recover, or buy old debt for pennies on the dollar, and then routinely harass debtors with illegal calls and letters.
Your Own Advisers Are the First Line of Defense
Your own advisers are the first line of defense. Most companies have an accountant and an attorney, and that is where the first step in the process must begin. If these folks are doing their jobs, they will spot the problem early, and head it off before it is too late. It is your responsibility to have your advisers ‘sanity check’ any potentially problematic offers. If your current advisers can’t help, find the right ones. Bezrukov still found enough owners who either had no outside help or ignored the advice they were paying for to take in hundreds of thousands of dollars in a few months. Such schemes prey on desperation.
So what should you look for before you pay anyone? Start with how the offer reached you. How did they even know your business? Bezrukov’s offer arrived in the mail, sent to owners who never asked for it. Advertisements that come in the mail or are sent out by email should not be trusted without verifying everything claimed about them first. Next, look at the size and speed of the promise. Be careful of any program or company that promises huge savings and/or ridiculously fast results. A cut of up to 75 percent in a matter of hours is exactly that kind of promise. There is no magic here, nothing that fixes the company’s situation in an instant. You should also be wary of offers that start with the payment. They expect you to make large payments in advance. In his case it was $1,250, sent by wire transfer before anything happened. In short, rule out companies that promise to lower balances quickly, and rule out any company that asks for a large upfront fee. Do not let desperation control your decisions.
I encourage you to check any company who sends you these offers. Ask to see their license. If the agency fails to present satisfactory proof of licensing, do not sign the agreement. Do they hold any certifications? Do they have any consumer complaints against them with the Better Business Bureau? Ask for references too, and ask whether they have done business with anyone you know. Legitimate companies will be happy to provide a reference to help you evaluate their skills. You don’t need to trust a company that’s not willing to tell you about its past. If a firm cannot give you references, walk away. Did it work for other people? Find out before you commit.
But There Are Legal Ways Out
If you are worried you are drowning in debt, you are likely right. But there are legal ways out, and none of them start with wiring money to a stranger. The first is to go back to the creditors you already have. If your debt is burdening your business, contact your creditors to explain the situation. Ask for as much time as you need, and try to reach an agreement on a payment plan. With some flexibility, you might be able to pay off what you owe while continuing to operate as usual. The aim is a monthly plan that leaves the business enough capital to keep growing. Another option is borrowing. An SBA loan, or a loan from a private lender, can provide financing and then your business can start to grow and pay the loan off. There’s a third way out of your debt-laden mess: bankruptcy under Chapter 11 or Chapter 13, which can let a business discharge many of its obligations and still keep its doors open. Whichever road looks right, sit down with your accountant and have a discussion about the financials of your business.
‘Give me your debt and I will lower it by 75 percent in six to 12 hours for only $1,250’ sounds like a pitch from a scam artist. If you take the offer and do not do your homework, you may end up with more problems, not less. Always follow up on these offers with a background check of the company. Take one day. One afternoon. Sit in the quiet and look at the numbers. If you are behind on your bills, and someone promises to make it all go away, walk away. Remember the old saying: If it sounds too good to be true, it probably is.
