Swartz Helps Businesses Eliminate Debt Problems

If Bob Swartz does his job right, the only debt his client will have is one of thanks.

He is founder and owner of Financial Technologies, a firm specializing in helping small businesses manage and erase their out-of-control bills.

Swartz said he has helped businesses with debts ranging from $10,000 to $37 million. The average debt is between $50,000 and $250,000.

Swartz, who was a business turnaround specialist and manufacturer's representative before starting his own firm, said the 1980s acted like a financial rake weeding out many businesses with too much debt. Now a new generation of debt-laden companies has emerged. "Fifty percent of the companies out there are undercapitalized and struggling," he estimated. On way Swartz is able to help companies avoid bankruptcy is through factoring companies.

"Factoring companies buy a business' accounts receivable at a discount. That gives the business owner immediate cash to service their debt and frees the owner from having to wait for their customers to pay before the business owner can pay their debt," he said. Swartz gets a retainer and his fee is based on what he does for the client. "The fee can be an hourly rate or a percentage. We get into many aspects of a client's life to ease their burden. I have even negotiated with some clients' landlords to get more breathing room."

Swartz said businesses get into financial difficulty for a variety of reasons including:

They extend too much credit to customers, leaving themselves vulnerable.

The businesses have dishonest employees.

They are undercapitalized, which leaves the companies with little margin for error.

They depend on one of two customers instead of being more diversified.

Too much debt, or cash-flow problems, can make business owners panic and do foolish things like not pay federal or state payroll taxes in order to meet their own payroll or other obligations. "That's a one-way ticket to disaster. Another thing some owners do is borrow against their credit card to meet short-term debt," Swartz said, shaking his head in a mock amazement.

Swartz -- a jovial fellow whose white hair and beard give him an air of wisdom -- said credit laws are written to protect individuals and businesses from unfair debt collection methods. He meets with a business owner to appraise the situation. If hired, Swartz gets a limited power of attorney from the owner and becomes the sole company representative dealing with creditors. "That frees up the owner to run his business and service debts," Swartz said.

Most creditors realize that if a debtor or company goes out of business or into bankruptcy, the creditors may not get any of their money. "We negotiate with the creditors to reduce the debt," he said. Some creditors will not negotiate and in those cases, clients may have to go into Chapter 11 reorganization bankruptcy. His advice to business owners getting too much debt: don't use credit cards to pay short-term debts and get debt counseling as fast as possible.

One of the companies Swartz helped was Information Word Systems. Owner Richard Slaughter said Swartz helped him avoid bankruptcy. The telecommunication sales and service company found itself deep in debt when a major supplier and two of the company's major banks all went out of business in the 1989-90 period. "Bob helped us restructure the debt. He held our hands and took us through negotiations. We have some long-term debt to pay, but he made it easier to start a new company," Slaughter said. His new company, Digitel, also is a telephone sales and services firm. "Bob Swartz did a hell of a job for us," Slaughter added.