One of the most lucrative industries out there is the money lending business. It comes with a huge responsibility as it’s associated with a lot of risks. You have to carefully scrutinize creditworthy individuals and make sure that you get good value for your money.
Therefore it’s not a business for the faint-hearted. Where you encounter a bad debtor, paying back the loan becomes a mountain to climb on.
So you have to put systems in place such that you recover your principal plus the interest. These include Signing a contractual Agreement and provision of collateral Security.
You also need to do follow-ups in order to verify the client details. Here are some warning signals that may red flag your client for a loan.
Some of the tips also apply to other business ventures that you may be carrying out. Be sure to read thoroughly and understand them perfectly well.
1. They don’t take you serious
People often joke but not when it comes to business. A bad debtor will question and underrate your business practices. They might go to the extent of despising you.
A bad debtor can go an extra mile and manipulate your emotions. They do so to make themselves appear legitimate. Conmen also leverage this aspect.
2. They mix business with friendship
Just like any business, friendship and family relationship should never be mixed with business. A bad debtor usually friend zones you to benefit from that angle by asking for a discount or cash without interest.
That kind of relationship only lasts for the time he/she is in need.
It can be very hard to recover the money and if all goes sideways, both of you might end up sworn enemies.
3. They seek discounts
Loan businesses are associated with written contracts and these contracts bind parties that want to transact. So once a contract is signed, the agreement is legally binding.
Therefore a client that seeks a discount before the contract and after the contract is likely to become a defaulter because they are not honest to the rules binding the two of you in the contract.
4. They are not contented with your interest rate
A bad debtor thinks you charge high-interest rates when actually your rates are favorable. Such clients are either not in dire need of a loan or they want to manipulate you.
You need to stand firm and provide them the option of accepting the offer or leaving it.
5. They don’t answer your phone calls
When you have loaned out cash to a client, there should be a balance of communication between you and the client. Where the communication is rough, it’s a warning signal.
You will need to start considering options of whether to sell the collateral security or not. Such a client is likely to be a defaulter.
6. They give you false hopes
When the loan is due, a bad debtor will ask for more time and when the duration they asked for gets due again, they will set another date.
The cycle continues until they bring out the beast in you and then they play a victim.
7. They pretend not to have money when they actually do.
When a bad debtor doesn’t want to clear you, they will look for all excuses to make you understand that they don’t have money when in fact they actually do.
You will find them enjoying all the fancy and luxurious lifestyle at the expense of paying you.
8. They don’t keep to their commitment
A bad debtor is not a timekeeper. They are not organized and committed to their payment date. They think they have all the time in the world without knowing that time is money.
They always love to be pushed around.
9. They think you’re too serious
When it comes to money issues, a bad debtor will look at you as being too serious. They think your being naïve and yet your being considerate on who you’re giving the money
They don’t realize that you had to make a choice on whether to give the money or not.
10. They don’t offer collateral security
A bad debtor will not want to offer collateral security in exchange for cash. They want free goodies.
If you tell them about security, you can easily get an answer like am the security. You know where to find me.
In case they offer collateral security, it’s usually below the actual value of the money.
Bad debtors are everywhere in every aspect of a business. But did you know that once you become a bad debtor, you miss a lot of opportunities because you spoil the relationship that you have with the person who trusted you? It costs greatly because you undermine the business.
Have you ever encountered a bad debtor in your business or with your money? Comment below.