It's the Last Word-Guaranteed

Business Credit, Sep/Oct 2009 by Hayes, Barbara

The first rule that I was introduced to upon entering the credit world was to make sure you understand the wording of any document you sign. Do not sign if you have any doubts about the commitment, especially if there is fine print, as the consequences can be catastrophic. Decisions affect us all every day of our lives and there is no reason to contribute to the odds of making situations worse by not questioning what you sign, no matter how simple the paperwork.

Recently, this became very realistic in my career while trying to collect on a delinquent account. The owners were very uncooperative and after several attempts they informed us that they were no longer in business and to quit calling, claiming it bordered on harassment. There was no bankruptcy involved, they were just tired of the line of business they were in. In doing our investigative work, it was confirmed that the business status with the Secretary of State was now inactive. The phone number was shortly thereafter disconnected.

In reviewing the file, to my surprise, that glorious piece of paper was found. The owners had signed a personal guarantee. It was only on white paper, but it was golden to me! The personal phone number from the guarantee was answered by one of the owners, and we explained that we would be able to collect the amount owed as he had signed a personal guarantee. Surprised by my serious tone, he quickly asked what that meant. I explained that he was personally liable for the debt; it had nothing to do with the business. He became very eager and listened to the entire description of the part of the document he had failed to understand. I asked if he had a copy in his files or if he would like me to provide him one to save time. He asked many questions and repeated that he wasn't aware of what it meant and thought he was just signing our terms and conditions for the payment terms.

In fact, both owners had signed on the dotted line on our credit application without understanding the guar- antee section. They had also signed very legibly. The print in the guarantee section was in the same font used for the terms and conditions section and not hidden away in small print. They thought they'd be off the hook if the business closed.

The conversation went on a few more minutes with the owner stating that he shouldn't have to pay the entire amount because he had a partner. I burst his bubble by stating that he could work that out with his partner, but that we would collect from him since it didn't matter how many signatures we had as long as we were able to contact at least one of the parties. I would have loved to have heard the conversation when he made the call to his partner to explain the personal guarantee, that they were liable to our company and that we would go after them to collect.

There are many rules we learn in school along the way to getting our degrees and we might think we'll never again use the majority of them, but the personal guarantee is one rule that I have and will continue to live by - especially now that it has clearly become a "golden rule" in my book.

What a perfect time of year for a Trick-or-Treat story with a happy ending. Full collection was received on this account in October, with interest tacked on. Oh, yes, they didn't read the part about interest being charged on the late balance either. Surprise, surprise.

I love getting the last word, especially when it comes guaranteed.

Barbara Hays is manager of Credit and Collections at AAF International She can be reached at bhays@aafintl.com.