Bankruptcy: A Defaulter’s Dilemma
By Danny Batler
In the last ten years, the marijuana market has expanded to become a multibillion dollar sector. This sector appears to be a goldmine for entrepreneurs and while some find success within the industry, others struggle to break even.
With many businesses failing to break even, the industry is often disrupted. However, the harm done to the business and its owners may be considerably worse. Failure to break even within the cannabis industry is devastating. This is because cannabis businesses are unable to file for bankruptcy.
Among the most popular alternatives is something called receivership. In receivership, often, the court will appoint a receiver. Receivers are an impartial, third-party professional known as a court-appointed receiver who is responsible for managing the company's assets throughout the legal proceedings in an attempt to pay off creditors and resume successful operations. As a result, businesses and creditors are protected without having to file for bankruptcy. Due to how well it protects both enterprises and people, this technique is commonly used. However, the process of receivership is not always simple and still involves the court. That is why cannabis businesses also are choosing to employ personal guarantees.
Due to complex federal rulings surrounding marijuana, payments within the industry are extremely complicated. As a solution, many cannabis companies extend credit to customers. Although risky, they protect themselves through something called a personal guarantee. When a personal guarantee is used, it is a written contract between a guarantor (receiving finances) and lender (giving finances). The written agreement states that the guarantor will become liable for the debts if they default on payments. In the case of default, the lender then has a personal guarantee that allows them to seek repayment from personal assets of the defaulter. Ultimately, this protects businesses from ever running into credit issues. It also takes away the chance of having to enter receivership.
Being the most successful debt collection agency within the cannabis sector we are well equipped to handle these issues. When companies start to notice trouble, it is important to act quickly and get paid for accounts receivable. Although bankruptcy is sometimes inevitable there are many safeguards that can be used to protect your business.
CannaBIZ Collects is your one-stop solution for all your cannabis credit and collection concerns. We are uniquely qualified to resolve all collection issues in the cannabis industry. With over 35 years of collection industry experience, CannaBIZ Collects is the first and leading cannabis collection agency.