Automobile Dealerships – Out of Trust – Tips for Lenders

Out of trust positions do not cure themselves and regardless of past cordiality’s, any situation involving a bad loan could always result in litigation. Accordingly, a lender should immediately begin to position itself in a light most favorable for litigation by always conducting itself in a business like manner. The phrase “business like” means in a straight forward, professional manner.

The lender should decide upon a tentative course of action and then have a meeting with the dealer to discuss the problem and possible solutions. The dealer should be immediately made aware that the lender recognizes the problem, although perhaps not the cause, and that while the parties have a mutual interest in solving the problem their interests will probably conflict at times because each party has a duty to protect its own shareholders; therefore, the dealer should rely upon his or her own advisors (attorneys, accountants, consultants) for advice.

While workout personnel must be as blunt as possible, care must be taken to avoid their actions being construed as “management” or “control” of the dealership’s business. Once the “control” line is passed, the financial institution exposes itself to a variety of legal actions. For its own protection, the lender should have a written internal policies that state:

(1) None of the lender’s employees have either permission or authority to make oral promises to the dealer; Kruse v. Bank of America, 202 Cal. App. 3d 38 (1988).

(2) None of the lender’s employees should ever speak disparagingly about the dealer or the dealer’s advisors; K. M. C. v. Irving Trust Co. , 757 F.2d 752 (6th Cir. 1985).

(3) None of the lender’s employees should ever make threats upon which the lender is not prepared to act; State Nat’l Bank of El Paso v. Farah Manufacturing Co. 678 S. W.2d 661 (Tex. App. El Paso 1984).

(4) None of the lender’s employees should divulge to nonmaterial third parties any information concerning the dealer’s financial status, without the prior written consent of the dealer; Rubenstein v. South Denver Nat’l Bank, Case No 86CA0840 (Colo. 1988).

(5) None of the lender’s employees have the authority to make management decisions regarding the day to day operations of the dealer’s business; Lurgen, Liability of a Creditor in a Control Relationship With Its Debtor, 67 Marq. Law Review 523 (1984); Also see: Restatement (Second) Agency, Section 14-0, Comment “a”.

(6) All of the lender’s employees are required to make memos to the file regarding conversations with the dealer and they should be conscious of that fact whenever speaking with the dealer or the dealer’s advisors; the employee should not engage in the kind of conversations or perform the kind of actions that would cause embarrassment to the lender if the information regarding those conversations and actions were to be contained in a written memo to be read by a judge or jury.

(7) The lender must work closely with its own attorney during the entire workout process.

These rules should help ensure a business like atmosphere and a business like approach to resolving the problems at hand and thus increase the probabilities of accomplishing a successful workout.

The lender should make the dealer aware that while the lender has no intention of operating or controlling the dealer’s business, certain basic procedures will be required to protect the lender’s interests amongst which will be reducing agreements to writing.

Having met with the dealer, the lender should permit the dealer an opportunity to seek outside advice. The circumstances of each case will dictate the definition of a reasonable amount of time. Sometimes an hour could be too long, other times a day too short. After deciding upon a time to reconvene, the lender should be prepared at this second meeting to enter into a “COLLATERAL PROTECTION AND SET-ASIDE AGREEMENT” that includes, in addition to the standard contract language regarding default, jurisdiction and term, the following:

(1) Recite the outstanding obligations of the dealer to the lender;

(2) Enumerate the notices given by the lender to the dealer, informing the dealer of the problem and enumerating the dealer’s responses to the notices;

(3) Make demand upon the dealer for full payment of all indebtedness owed the lender, by the dealer and the dealership;

(4) Have the dealer acknowledge, individually and as president of the corporation, both the dealer’s and the dealership’s inability to pay;

(5) Recite any workout arrangements agreed upon between the lender and the dealer, such as additional capital loans and how the proceeds from said loans will be spent, method of pay-back, use of demonstrators, the method agreed upon for handling the out of trust monies, the method to be used with respect to the funds received from continued operations, additional security, if any, by the dealer, or the dealership, the method of handling any future floor-plan advances;

(6) Provide for the lender’s use of a “keeper” at the dealership premises, listing the keeper’s duties and obtaining the dealer’s written consent thereto;

(7) Provide a contingency clause for the lender to take further actions, without notice, in the event the lender’s collateral continues to deteriorate, or in the event the dealer breaches the agreement;

(8) Provide for affirmative covenants of the dealer, with respect to further documentation, method and time of payments to the lender, security of the lender’s collateral, delivery of receipts and collateral and payment of the lender’s expenses, with respect to protection of its collateral.

THE ABOVE COLLATERAL PROTECTION AND SET ASIDE AGREEMENT IS ONLY AN INTERIM TOOL, TO PROVIDE THE LENDER AN INCENTIVE TO PROCEED WITH A WORKOUT PLAN. IT IS NOT THE PLAN ITSELF.

With the above acts accomplished, the lender should make every legitimate effort to have its dealer succeed. A successful workout plan provides good relations not only with the lender’s debtor, but it also establishes a standard in the industry with which other business people wish to become associated. It shows the world the lender knows what it is doing.

As soon as the protection and set aside agreement is signed, the parties should immediately discuss a realistic plan for permitting the dealership to workout of its problems. The resulting plan could be anything from recapitalization to liquidation. The process for developing a plan is covered in another article.

For additional information on this and other automobile dealership subject matters, go to: http://EzineArticles.com/?expert=John_Pico

John Pico is the Managing Partner of Advising Automobile Dealers LLC. Mr. Pico served as a court appointed “Consultant to Debtor” in bankruptcy cases, a “Court Appointed Mediator” in automotive disputes, the “Court Appointed Arbitrator / Appraiser” in partnership disputes, a “Court Approved Consultant to Receiver” in a check-kiting case, as a “Superior Court Mediator” in dealership/lender litigation and has been recognized as an expert witness on both State and Federal levels.

He has consulted on upside-down positions of over $50 Million, out of trust position of over $4 Million and a bank overdraft of $30 Million. Since 1972, Mr. Pico has completed over 1,000 automobile dealership transactions, whose combined values exceed One Billion Dollars.

Debt Consolidation Services – Ensure Early Repaying Of Debts

Surely, you do not want to make high monthly payments anymore towards your old loans, because of huge burden on your limited resources. You have the option of availing debt consolidation services for finding help from professionals of the field.

The main intention is to reduce your monthly outgoings to larger extent. You do not have to take out a new loan. Instead, what you do is to merge your numbers of payments on unsecured loans, credit cards or store cards, under low monthly payments to an agency. This way you get rid of your creditors too.

You shall have to enroll your name with the professionals of the field. They will, then, negotiate with each of your creditors, in order to reduce interest rate on your past loans. This helps in pruning your monthly outgoings.

Before approaching to your creditors, debt consolidation services make a repayment plan, keeping your income and overall financial capability in mind. In doing so, they take your income and expenditure into account. But, ensure that you stick to the repayment plan. Continuing with old spending habits means you will have less amount each month for making the payments. It is advisable that you make a budget and spend the money accordingly.

You are, then, supposed to make low monthly payments to the service provider. The company disburses the payments to your creditors in few years. Make sure to check with your creditors that they are regularly getting the payments.

Debt consolidation services should be availed carefully. Choose a company which has a good experience of the field. Read the terms and conditions of minutely before signing the deal.

Mortgages – Offset Mortgages

With growing uncertainty as to the housing market in the UK, offset mortgages are becoming more common.

This type of plan allows homeowners the chance to reduce interest by offsetting credit balances against the mortgage debts.

This would mean that interest would only be charged on the net balance of the mortgage, giving homeowners the chance to save money by cutting out a portion of their costs.

By combining home loans and savings in an offset mortgage, homeowners could find themselves saving money on interest, as the savings part of the agreement would not be susceptible to the interest rate associated with mortgages.

Through this method, borrowers can effectively overpay each month, allowing for greater flexibility of payments and the opportunity to clear their mortgages quicker.

Because you’re combining savings with the mortgage itself, there is the potential to use those savings to make monthly repayments – effectively giving yourself a repayment holiday.

However if you also want to contribute a little more than the minimum payment each month, there is the option of paying in as much extra as you like on a regular basis, or through a lump sum. Whilst this method may not pay off the loan itself, it can help to cut the balance, on which interest is calculated.

Offset mortgages offer flexibility in payments, allowing borrowers to pay off a portion of the loan before re-borrowing up to the maximum figure in order to cover areas such as home improvements.

There are now a wide range of different deals available for those looking to switch mortgages, most offset mortgages are organised through mortgage brokers rather than directly.

If you’re looking to remortgage your property, it is advisable to shop around for an offset mortgage deal. Lenders usually set credit limits for such mortgages, allowing borrowers to plan repayments more effectively, many lenders also allow full drawdown up until the end date of the mortgage.

Looking to remortgage? Compare from a wide range of lenders to find a mortgage deal that suits you.

Same Day Loans – Want Some Extra Cash Amidst The Month?

For a salaried person it becomes a hard task to arrange some extra cash for unexpected and inescapable demands when befalls. They seek for cash that can be availed in instant and easy to procure. Such cash can be obtained by considering the same day loans. Interestingly the cash can be borrowed within the same day and without pledging collateral. The practice of pledging collateral is replaced by easy going simple criteria which are as follows: applicants should be a regular salaried employee; applicants should hold an active and valid account. The cash can be borrowed by persons striving from bad credit if they can fulfil the stated principles of eligibility.

Salaried persons can easily borrow the cash between £100 and £1,200 in a sparing manner. The cash is approved for a fixed due date of 30 days from approval date. This approval date comes with flexibility and can be extended if any incongruity occurs. The rider to waive the due date can be subscribed by paying an extra fee and informing lender’s office.

More and more flow of banks and financial institutions has made it easier to acquire the cash. Interest rate of this cash is slightly higher because of the short repayment schedule and unsecured form. Applicants can procure better results by contrasting the loan quotes of different lenders.

The cash process is attached with the e-application technology which enables the candidates to access the cash around the world. The candidate can apply from home or office by keeping the pace with the hectic schedule. This e-application method cuts down the hardship of following paper-work.

Same day loans help the borrowers to disperse and execute emergency demands like medical bills, school fees, electricity bills, car bills, credit card bills, grocery bills and correspondingly. So, this extra cash is indeed helpful and let borrowers overcome from state of financial crisis.

Online Credit Card Processing Services – What To Look For

A good credit card processor will offer an accommodating service and will allow you to process your transactions faster and at a better rate. Make sure that the average approval rate of the processor is good before applying. However if your merchant account provider is offering you online credit card processing services than you do not have to worry about such details.

Low monthly fee is another option worth checking. This allows you to keep the overhead costs down and get good ratings on per month transactions. Good credit card processing services will keep the ongoing fees and costs in check. Setting up a merchant account with credit card processing services and a secure payment gateway should not be much of a hassle and merchant providers will help you setup an account for your business as soon as your application is approved, which generally takes only a few days.

A 24/7 customer service is a great benefit and processing services which offer this via various options like phone, email and fax etc understand the importance of your business. Also internet facilities like secure virtual terminal and POS options allow your business to process transactions faster and give your business a great deal of flexibility. With such facilities, customers become capable of using online credit card processing services from anywhere at anytime.

Apart from these features there are several other benefits that online credit card processing offers. These include cost effective e-commerce solutions, online fraud protection, shopping cart services, electronic payment processing, various credit card processing tools, risk management services and much more.

In short, online credit card processing is the need of the day for all e-commerce businesses. Not offering online credit card processing services to your customers mean that you are losing potential customers and offering this service allows you not just to expand your business beyond the geographical boundaries but also to gain several other major benefits as well. Make the right choice for your business and choose a merchant account provider who offers valuable services with added benefits especially online credit card processing services.