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Thread: Credit applications

  1. #1
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    Credit applications

    If I decide to open and account with a company, with lets say a credit limit of lets say R5000, I fill out all the documentation and the company accepts the application, does credit checks on me to find that I have a bad credit history, but they still accept the application form and notify me that I can purchase for the amount agreed on the application. We do business for a couple years then one day the company I am dealing goes through some rough patches so they look for investors, the company goes through some changes, and during this process my account runs into the tens of thousands, so my account is put on hold, we agree on a sum that I pay, R30 000, but when I arrive the following day, I am told my account is still on hold and they don't want to do business with me any longer until I pay the full amount, I have committed to a project and need the balance goods to complete the project.

    Just to put a spanner in the works, they quoted for the goods but when I was awarded the project I was told by the company that because the salesman who quoted for the goods is no longer working at the counter, the quote is no longer valid and the prices they charged me for the goods was marginally higher. So I had to shop around for the goods and pay cash up front, which caused a major cash flow problem in my business.

    Now a couple months down the line a lawyer has sent me a registered letter demanding the outstanding money, which totals a lot more than the credit application.

    What would the customer protection act say about this?

    By the way I am paying the account I just thought it would be an interesting topic to discuss.

  2. #2
    Diamond Member Justloadit's Avatar
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    The fact that they gave you more credit than the application, does not detract from the fact that you owe them the money.

    Most of the credit applications have a clause in which the supplier can request the full amount at any time, and the onus is on you to pay it as and when it is requested.The fact that it places you in a predicament is not really their problem.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar and LED lighting solutions - www.microsolve.co.za

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    Platinum Member sterne.law@gmail.com's Avatar
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    The quote still stands irrespective of the salesman leaving. Estoppel applies - where even though a representation made isnot authorised but due to a representation you act to your detriment the representation stands.
    If an agreement was reached, then the original agreement is novated' and the R30000 and relevant terms are in play.
    Although I can refuse to do business with whoever (discriminate aside)', the quote acts as a contract and possibly the new payment agreement.
    Anthony Sterne

    www.acumenholdings.co.za
    DISCLAIMER The above is merely a comment in discussion form and an open public arena. It does not constitute a legal opinion or professional advice in any manner or form.

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    Diamond Member Blurock's Avatar
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    Remember that credit can be called up at any time. Even a bank overdraft is only an overnight facility and is repayable on demand. Always make alternate arrangements as a backup for when it hits the fan.

    Business rule number one: Never be out of cash! Cash flow is king.
    Excellence is not a skill; its an attitude...

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    Firstly, being a businessman I understand when you owe someone money you must pay it, be it in a contract or otherwise, however when people don't stick to their side of the deal it makes it a little more complicated.

    If you as a supplier quote a price for a contract you need to stick to it otherwise the contractor will loose money, which in turn will cause cash flow issues, which means you the supplier will not get your money.

    Secondly, when you have an agreement verbal or otherwise you need to stick to it, if for some reason you cant, don't agree on it , in my case a large portion of money was paid over to the supplier even though the supplier didn't stick to the quote, then didn't stick to the agreement to keep supplying goods even though I was prepared to pay the price they were charging and not the quoted price, which in turn meant I had to go to another supplier and pay cash upfront at a higher price.

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    Blurock, if we all had enough cash to run companies, we wouldn't need banks, overdrafts, credit cards, supplier accounts, though I agree with you 100 %, cash is king.

    I am once again finally in a position where I no longer have accounts, HP on vehicles, all my equipment is paid up, etc. I have even got a small savings which I didn't have 6 months ago, however I have this one issue still outstanding which will be sorted out in the very near future. One last thing, my bond, that will be next years goal.

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    Diamond Member Blurock's Avatar
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    ians to not have any accounts may not be so good. One will always require credit along the way. Having accounts also builds up a credit profile which may help you in times of need. Accounts just need to be managed so they do not become a burden.

    Now when you pay up that bond, keep the account open so that you can draw against it in case of an emergency. Then put the money back as soon as you can. If you have surplus cash (we never have) you can put it in a call or money market account or a type of investment that is accessible so you can just do an internet transfer when required. Again, after the crises, put the money back.

    Having access to cash also allows you to take advantage of opportunities where you can get a discount on early settlement or buy stock at a discount.
    Excellence is not a skill; its an attitude...

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    That is ultimately my goal, stop making everyone else rich by finances charges, accounts, etc , pay off my bond and have access to a few bob when I need it to finance a project or go on a holiday buy a new vehicle or what ever, considering how low the interest rate is on the bond anyone who doesn't strive to do this is wasting hard earned money.

    Buying stuff for cash is also king, there are pros and cons, but more pros, better price negotiations, buying stuff directly from suppliers because I no longer support one wholesaler, cheapest price gets the order, which means I can now mark up my materials slightly higher and increase my profit margin. It also forces me to insist on up front deposits, so when you take a knock from a bad paying customer your losses are less. I stay away from customer who don't want to pay deposits, because my theory is that if they cant pay the deposit how they going to pay the final whole bill.

    One of the cons is that you cannot take on big projects, quite honestly I don't want to go big again, I see too many little contractors like myself go big and fall hard.

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    Diamond Member Justloadit's Avatar
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    Just remember that buying cash also limits you when you have a problem with goods, the supplier already has your money, and the motivation to exchange is very small, where as if you have an account, and the goods are not paid, the exchange process works far better.

    I would think that the best way is to have both worlds, you can buy cash but also buy on account, when you buy on credit, as soon as you complete the job, and get paid, you settle the account immediately, and demand a 2 to 5% early settlement discount.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar and LED lighting solutions - www.microsolve.co.za

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    This is one of things I enjoy about the internet, when you run a small business and don't have boardroom full of people to help make decisions or point out minor/major issues you might have over looked, you can have a forum full of smart people at the touch of the mouse.

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