DC Partners (Solutions) Pty Ltd working with a financier client recently had collections dealing with an estate agent where the agent alleged it could not pay 'factored monies' because of Covid-19.
In December 2019, the agent factored its rent-roll management cheque for March 2020, expecting to receive around $52,000.
Factoring is the business of purchasing accounts receivables.
In this instance, the estate agent 'sold' its March 2020 receivable in exchange for an upfront sum paid in December 2019.
At the end of March 2020, the agent then said it was unable to repay the factor the money (or any of it, despite banking it for themselves at the end of March) "because of Covid-19".
Factoring 'discounts' the purchase price of the receivable. The price paid upfront in December 2019, was based upon the time value of money with the expectations that the funds would be banked in March 2020. Obviously, the funds do not have the same value if the funds are not banked until June or later.
The agent is a well known agent from WA.
If a crime was committed, it was a crime of fraudulent appropriation. Alternatively, as was pointed out to the agent in collections discussions, the agent runs the very real risk that the estate agent continues to trade whilst insolvent, exposing the directors to personal liability. In those instances the agent's personal assets are exposed to creditors.
If your business is in a similar position, being unable to meet obligations to creditors, there are some important steps that you and your company need to take to protect your personal AND business assets. These can be discussed on 1300-327123 if you find yourself if this position (call anytime till late 5 days).