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My sales reps seem to think that using mechanics lien rights are an option for every customer - regardless of credit status! I keep explaining that it does not guarantee payment. I am pulling my hair out.
Signed, Balding in Baltimore
One of my favorite things about living in the South are some of the sayings. A clever Southerner can tell it like it is and you may never quite get that you were just called out. A personal and much-used favorite is "bless your heart." You can put that after anything you say and it makes it OK. "That is the ugliest baby, bless his little heart!"
To those sales reps who are touting the use of lien rights to sell more and to many, you can give a warm "bless your heart."
I know it can be frustrating but here is what I love about what your sales folks are doing: They have learned enough about credit and how to increase their odds of selling to marginal customers or assisting customers in securing their payments by inquiring about this option. So maybe they don't entirely understand liens and maybe they are a little too liberal with lien rights, but at least they are trying.
Briefly, and without overloading anyone with information, walk them through exactly what you need to offer to use lien rights to help give some additional comfort about this sale. Try to keep it basic. They don't need to be an expert but they do need to be clear on a few things.
Repeat after me:
- Lien rights are not a guarantee for payment. They are an additional layer of comfort that greatly increases our odds of getting paid.
- Lien rights are not free. It costs money to do a preliminary lien notice and it costs much more still to file the actual lien, so there better be some pretty decent profit in this sale.
- There are a few hoops they will need to jump through - like filling out a job sheet with the information needed to complete a prelim notice.
- The credit department has veto power on offering this option if the information is sketchy and just a bad idea.
There is no magic payment bean out there. Letters of credit are about the closest thing to it and even that can get a wrinkle (rare yes, but I am paranoid). Preliens offer a layer of comfort on payment. If the only reason you will sell to a customer is because you have lien rights, that sale may not be worth the risk. Maybe it is. What is the owner information? How do they look? What are the lien costs in your state? Your company has make a business decision on what the risk you are willing to take is.
All the while, remember to keep those "blessings" coming. It never hurts to throw a little charm on the situation. No matter what the real feelings are.