Covering Business Credit

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Business Credit and Collections
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We have a customer with a deficit net worth of more than $100 million that is losing about $20 million per quarter. This is a publicly traded company – but I would prefer not to give the name. In any event, senior management has decided for whatever reason to offer this customer a $1 million line of credit. The account is current and normally pays on time, but this decision still does not make sense to me. Would you care to comment?

Answer: It does not make sense to me either, but even with the information you have provided I do not have enough information to make any meaningful comments about this decision. I would comment that senior executives have the right to override credit decisions any time they believe that doing so is in the company’s best interest. As long as you have documented your concerns and the fact that management has opted to override your decision, you should be fine. I realize it is frustrating, but it is not all that unusual.

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