When we were first inventing our product, Ghostline ®, we were the epitome of Shoestring Budget™ inventors. We were a couple of wives and mothers who were working full time jobs and we did not have a lot of expendable income. We did have faith in our idea; enough faith to dip into our savings to get our first prototypes made. We did it in bits and pieces.

First, we each contributed about $200, when that money was exhausted we each dipped into our savings again to replenish our “company fund” in order to have the money to continue the prototyping process. Thankfully, our first visits to patent attorneys were free (we interviewed several patent attorneys before selecting one) but when the time came to start the patent application we each dipped into our family savings again. If you truly have faith in the potential of your idea, you will be willing to invest at least some of your own money. If you do not have enough faith in your idea to put your money, even if it is limited, where your mouth is, stop now. Do not waste your time or anyone else’s.

The USPTO database is the same one that you would find if you went to one of the patent and trademark depository libraries that are scattered around the country. By the way, although you can do these searches on your home computer, it is a good idea to go at least once to one of these libraries if you have the opportunity to do so because the librarians are so knowledgeable and helpful and it is a wonderful experience for an inventor. It’s just a great place for creative people to hang out and learn! The United States Patent and Trademark Depository Libraries around the country frequently hold free classes and seminars on all subjects related to inventing, patents and trademarks. Call your nearest branch to be placed on a mailing list for these opportunities.

In practice, though, things often go quite differently. Should the company temporarily swoon, you will get a call from your broker advising you that the loan is now due and you need to either come up with more cash or he will sell out your shares, at a loss, and cover the margin. Now a particularly optimistic type will find more cash, buy more shares, and set himself up for an even bigger fall. Many optimists have lost their life savings from a series of these episodes. Lawsuits inevitably follow.

In particularly bad markets, you are more likely get a call stating that the matter has already been taken care of and you now own only 50 shares of this company, but you no longer owe the broker a dime. This may be fortunate as it avoids the opportunity for you to put up more of your cash. However, should the company immediately recover and soar, lawyers will argue for you in court that you were not given proper notice and an opportunity to cover the deficit, which you certainly would have done.

Wall Street has always known that buyers are primarily interested in stocks that increase in value. Profiting from declines is un-American. The easiest sell is a stock or fund that has already gone up. You will naturally be more confident that a stock or fund that has gone up will continue to do so. A broker will show you a select list of stocks that have strong momentum. Your overconfidence will hurt you. Studies show that stocks that have good streaks soon revert to the mean. While your broker is sure to know this, he will not disclose it to an optimistic buyer. He also has other sales tools.

If your debt situation is worse than you care to admit, your credit score will help to bring you back to reality. It’ll also help you measure your progress in the eyes of lending professionals.

I’d suggest that you check your credit score once a quarter as you’re trying to clean up debt. It’s kind of like standing on the scale when you are trying to lose weight. It’s where the rubber meets the road. Either your overall situation is improving, or it isn’t. Getting your credit report isn’t the same thing as getting your credit score. Ideally, you would check both two to four times per year. You can receive your free credit report, which shows your account history and should be checked for errors once per year by visiting www.AnnualCreditReport.com. Your credit score, which is actually computed for lenders by private companies like the Fair Isaac Company (creators of the FICO score), is not required to be given to you for free. However, you can visit websites such as www.MyFico.com and pay a small fee to view this score that determines your rates on loans.

Here are the basic ranges and ratings for the FICO credit scores:

700–850. You’ve got “Very Good” to “Excellent” credit depending on where you fall in that range. Getting a loan is usually no problem for people with scores in this range, and borrowers with these scores usually get the best rates and terms.

680–699. You’ve got “Good” credit. With a score in this range, you can usually get a standard loan as long as your other factors, like income and down payments, are solid.

620–679. You’ve got “Okay” credit. You can usually get a loan for smaller purchases without a co-signer or a major down payment, but you’re going to pay for it. Borrowers in this range and below start getting charged higher interest rates and fees.

Below 620. It’s official, you’ve got “Bad” credit. You may or may not get approved for a loan based on how far below 620 your credit score is. If you do manage to get approved, the further your score falls, the higher the interest rate you’ll typically pay.

To make sure you’re not taking two steps forward and three steps back, make a chart where you start tracking your short-term balance, long-term balance, monthly debt service, and credit score.

It doesn’t matter how you create this chart. If you know how to use a computer spreadsheet, you can do it there. If not, go steal some paper and crayons from the closest kid you can find. Whatever you do, make sure it’s got a graph that plots your progress or decline. I promise this will go a long way to keeping you motivated and on track.

Insolvency procedures aimed at rehabilitation are also common, providing for the stabilisation and, usually, sale of the business to new owners, under the supervision of a specialist appointed under the provisions of a statute.

Insolvency legislation is aimed at overcoming such problems. The key challenge for policy-makers in this area is to design a legal and regulatory framework that meets two key objectives:

• To identify and rescue those companies that can and should be rehabilitated.
• To liquidate efficiently those companies that do not have a viable future.

In reality, various shortcomings associated with statutory frameworks, highlighted later in this chapter, create difficulties in meeting these objectives. Rescuing commercially viable companies within a statutory framework can be particularly difficult. Failure of such companies causes unnecessary losses among their stakeholders and for the economy as a whole.

Many of the drawbacks of rescuing companies within a statutory framework can be avoided if a company’s stakeholders, and in particular its creditors (who are usually the interest group most affected) can assess a company’s commercial viability and agree a financial restructuring without recourse to the courts. Loan workouts, which are essentially financial restructurings agreed in an out-of-court process, can therefore be
an effective tool for corporate rescues.