Bear with me for a while please as I share the challenges facing a business owner who has just lost a business. The various creditors begin to chase our hero for all the sureties signed in the past, and these sureties allow them to take judgments and then assets – the cars, the house, the furniture, the jewellery...

The issues at this time are: our hero loses self respect; loses direction; loses the assets needed to make a living; and loses financial credibility. Unlike the USA where business failure is seen as a necessary ingredient of future success, in our country we prefer to punish the unlucky entrepreneur.

In essence, our plucky hero is consigned to at least 5 years of significant challenges. Not only does s/he have no assets to leverage into an income, but s/he doesn’t even have the financial credibility to buy new assets. A judgment means that you’re not going to be buying a car, nor buying a house, nor getting a credit card, nor opening a bank account, nor renting premises, …

No credit card means that you’re going to really struggle with any form of travel because hotels, car rental firms and airlines are awfully suspicious of cash. No credit card means no Internet purchases. No credit card also means that you’re a kinda suspect person!

No bank account means that you can’t run a significant business in SA. You can’t register for VAT unless you have a bank account.

And try running a business in this country without a car…

I haven’t explored the softer issues like the extreme loss of self respect and loss of direction because that would really get depressing – which isn’t the point of this article. The point worth making is that most of the above stuff can be easily prevented.

For example, imagine that you already have 5 credit cards when the business dies. You won’t have to worry about any judgments because you already have the cards and they're not going to be taken away [as long as you keep paying them]. But if you were to apply for a new one at this point you wouldn’t have a hope in hell. These existing cards will allow you access to working capital, as well as flexibility in travel. And if the business is one of the overwhelming minority which prospers, has this been a wasted effort?

So why not get a few more cards right now? [Get them now – but don’t use them too hard! Your goal is to start building some solid foundations.] A good place to start your collection is www.bluebean.com - online application, quick answers, and rapid card delivery. But there is also BoE, ABSA, FNB, Nedbank, Standard, Diners Club, American Express, and quite a few others.

Or imagine that your significant assets are not in your name – maybe your spouse owns them, or another company owns them, or a trust owns them. That way people can still attack you, but what would be the point because they couldn’t get to your home and bludgeon you with it?

In Ireland, I believe, you’re not allowed to use your home as collateral into your business because the courts will not allow your home to be taken away from you. In South Africa it is the single most effective threat to force someone to pay up – even if the debt is not the fault of the business owner!

We are where we are today as a result of all the choices we’ve made thus far. Choosing to protect yourself and your family from the vagaries of your business simply makes sense. So get some new credit cards today! And look at putting your assets into a safe place. Please. And if your business prospers [please Lord] will these strategies have been wasted?

Knysna, September 10, 2002

© Peter Carruthers, www.petesweekly.co.za

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