How it works?
First you have to be entrepreneur making or rather selling something, its necessary. You have not to have any big building, equipment or staff. “Your” products you may deliver directly to anybody’s warehouse with a third-party service, so the only what you care is logistic in both: goods handling and collecting money. Payments are something you have to handle smart and delaying possibly forever. It is a key in this business. Understanding delay payment and operate such volume of money on you behalf is of course whole idea, security, patented way and clue.
Now what that type of business really means?
If you or anybody need a credit – bank is an answer. Usually. In some cases, some people have enough cash to operate freely and they don’t need credit. However, Americans are running on credit. Of course, “smart” entrepreneurs are running on low interest rate credit or no cost of credit at all. How about less than zero interest rate. It means you are taking credit let say $100,000. – and after 3 months you operate smart and, on your account, you see $110,000. – or so. I like it, do you?
That automatic working schemes are applied so often and on so big scale that there is nobody in a country who did not experience such “business as usual partners behavior”. The only condition to be successful is delay payment as much as possible. To the extent of strength of your business partners. Note that, nobody keeps a cash, everybody operate in the way to use money for a purpose of making more money. And of course, it does really mater whose money you will be using to convert it in your only profit.
What is the scale of that scheme? Let’s calculate; here we see some basic assumption:
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A = annual total quantity of transactions in delay
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D – average of amount delayed payment $30,000. – per each
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B = 90 days – average of each transaction delay
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C = 10% annual credit interests’ rate (that’s far away from real average 18%)
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E – quantity of businesses being victims of such activity annually 45 000 000
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F – monthly average of not paid on time transactions =7
|
Total volume of shadowed credit |
Total volume of interests from credit |
Total volume tax not paid annually at 20% tax rate |
|
$9,450,000,000,000.0 |
$945,000,000,000.0 |
$189,000,000,000.0 |
X
Volume of tax not paid after 3 months profitable activity $47,250,000,000.0 is not giving less impression.
Numbers shown are of course estimate, but not far away from reality. Moreover, all amount shown are used in economy however those they use it are probably not eligible to do this, because owners of that money are others. Others, they do struggle to the extent of all means and ways in a daily basis, working hard for good of accounts those smarter. Did anybody agreed for such behavior of your business partners when you contracted some service, production whatever? Did you? I don’t think so. This kind of extortion is in the shadow, gray zone of economy, eroding system and killing silently entrepreneurial soul of business owners. Or I am wrong, deadly wrong.
Some may argue that this is only one sided picture of whole reality.
Economy as a whole is continuously contributed with a huge amount of money (e.g. $9,450,000,000,000.0) stock market is growing and everybody shall be happy. Excluding those less fortunate they do not get their money as a payment on time. In that case such entrepreneurs are missing their payment for goods, production means, as well as lose a good will to order new equipment which allows more effectively produce whatever they do. As a global result of such cash flow disaster there are less production activity, more credit defaults, less global economical development, and so and so. Cost of credit, if any, is perhaps less and least expected consequence. Though that banking will be probably happy of that however how long?
Similar kind of calculation are for sure known to special group of interest: Universities, Lobbyist, vary Budgetary Comities. If Banking system is not interested in that credit volume, then who is? IRS? It looks like wrong address as well.
So, if you stay not paid on time, now you now why. And probably, what to do.
Marcisz Bielski, 1/25/2020
