Can You Charge Your Client Compound Interest for Late Payments?

Photo of a calculator to show compound interest.To ensure timely payments from their customers, many companies have clauses in their agreements or invoices with terms of interest for late payments. It is not uncommon for invoices to state they must be paid within 30 days, after which the balance shall accrue at 1.5% interest per month.

There is no set limit in New York for how much interest may be charged, but the amount should be reasonable and not excessive. The interest rate described above has been ruled as acceptable by the courts in New York and is widely used. Beyond said interest provisions, businesses may seek additional remedies. For instance, if a customer defaults in payment but then agrees upon a subsequent arrangement to pay the outstanding balance, the business may want additional interest because of the defendant’s initial default. The business may insist on an agreement wherein the customer must pay the balance plus interest “compounded monthly” at a certain percentage until paid in full.

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Can a Debtor Get Their Money Back?

An empty wallet to represent a debtor getting their money backAfter finally collecting the monies owed to you through debt collection litigation, the debtor wants their money back. How is that possible? Doesn’t the money belong to you? Can a debtor really get their money back?

Recovering monies owed can be a long and arduous process. First, you have to put the customer into collections. If the demand is not productive, you needed to sue and wait for judgment. Only once the judgment is entered can you collect the monies through judgment enforcement.

It’s unbelievable to think that after all the time and effort you’d have to return the money. However, it can and does happen.

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What Business Owners Should Know Before They Guarantee a Line of Credit

Piles of cash to represent a Guarantee a Line of CreditMost business owners have a line of credit with the bank but don’t realize that, as the business owner, they may be personally responsible for repaying any monies loaned. Often, especially in uncertain financial times, the bank will want someone to guarantee a line they might not otherwise make — usually the officer of the borrowing company. As the business owner, the bank may ask you to personally guarantee a line of credit for your company.

Unlike a traditional loan, which requires you to borrow the face amount of the loan and begin repayment of interest and principal, a line of credit requires you to repay only the amount you borrowed plus any added interest. If you don’t borrow, there’s nothing to repay. When it comes to unexpected expenses and opportunities, a line of credit provides a loan at the ready.

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