Question

Your company, a small start-up corporation, buys raw materials from Regina Fabrics on credit. Because her...

Your company, a small start-up corporation, buys raw materials from Regina Fabrics on credit. Because her company has had several problems over the recent months, Regina demands either full payment in advance or a guaranty from someone with proof of assets to cover the debt. Your company does not have the cash on hand but you have sufficient assets to cover the debt and so you sign a guaranty on a six-month loan for the fabric. After two months, your company has the cash to pay off the loan and your financial officer offers to pay Regina. Because of some issues with her company, she refuses to accept payment and requests that you continue to pay the monthly payments. A month later your company is now short on cash and Regina comes to you as the guaranty and requests that you make the payment. You are unhappy that she didn’t accept the payment when you had the cash. Evaluate whether or not you should have to pay as the guaranty.

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Answer #1

Paying early or Leading Payment surely has its advantages of reducing liability by paying it early.

Our firm after two months had the cash to pay off the loan and our financial officer also offered to pay Regina. Because of some issues with her company, she refuses to accept payment and requests that we continue to pay the monthly payments. A month later our company is now short on cash and Regina comes to us as and requests that we make the payment.

It disrupts our financials and we cannot be jumping between payment schedules this easy.

Plus, we are short on cash and cannot pay the dues in one go.

Conclusively, we should stick to monthly payments and not sell of assets as guarantee to pay Regina early

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