US Business Model is a Scam...read this explaination
If you own a business, you know when you make a delivery on a product, you don't get the money right a way. There is usually a 30-60 days lag (some business even have 120 days or more lag). They do this because most businesses use cash flow after they sold the products to finance their purchases. In most cases, when there is a strong relationship between the supplier and the seller, this is perfectly fine.
This works well when the economy is all rosy, but when you have a cash crush, cash flow becomes a real problem because banks are all skittish on making short term loans to businesses. When this happens, suppliers are not getting paid. This happens to a reputable businesses, even they became "stiffs". And this is worse than creditwagering stiffs, because even when the seller stiff you, you still have to make widgets for them...otherwise, everything they owe you up till now became "dead money".
This gets scary because when you have over 120 days of account receivables, you pretty much made multiple deliveries during this time period. Say you make 1 million dollars worth of widgets for ACME widget store every month, with 120 days of non receivables, that accumulates to 4 million dollars worth of non payment. Plus you already have widgets in production that might cost you 1-2 million or more.
Now you're uncertain whether ACME widget store is going busto or they might turn around. It is pretty hard to step the brakes and halt production because you know if you do that then 5-6 million worth of owed products became "dead money". With this sunken cost, you're pretty much forced to make more widgets and gamble that seller will not go busto.
If ACME widget store goes busto, then you're really fvcked because the widget store probably already owe a shitload to the banks and insurance companies, so there will be nothing left for the suppliers once they liquidate. LLCs don't really affact the CEOs and the owners because US bankrupt law protects their personal property.
With this kind of business law, companies can use the suppliers as leverage to take on risks. More risk = more potential profit. So that is American business model in a nut shell.
This works well when the economy is all rosy, but when you have a cash crush, cash flow becomes a real problem because banks are all skittish on making short term loans to businesses. When this happens, suppliers are not getting paid. This happens to a reputable businesses, even they became "stiffs". And this is worse than creditwagering stiffs, because even when the seller stiff you, you still have to make widgets for them...otherwise, everything they owe you up till now became "dead money".
This gets scary because when you have over 120 days of account receivables, you pretty much made multiple deliveries during this time period. Say you make 1 million dollars worth of widgets for ACME widget store every month, with 120 days of non receivables, that accumulates to 4 million dollars worth of non payment. Plus you already have widgets in production that might cost you 1-2 million or more.
Now you're uncertain whether ACME widget store is going busto or they might turn around. It is pretty hard to step the brakes and halt production because you know if you do that then 5-6 million worth of owed products became "dead money". With this sunken cost, you're pretty much forced to make more widgets and gamble that seller will not go busto.
If ACME widget store goes busto, then you're really fvcked because the widget store probably already owe a shitload to the banks and insurance companies, so there will be nothing left for the suppliers once they liquidate. LLCs don't really affact the CEOs and the owners because US bankrupt law protects their personal property.
With this kind of business law, companies can use the suppliers as leverage to take on risks. More risk = more potential profit. So that is American business model in a nut shell.
