Category Archives: For Investors
Access to finance for SMEs
Access to finance for SMEs is critical to the growth of Australia, and its position within the world.
Small and medium sized enterprises (SME) make up a massive portion of Australia’s broader economy. SMEs hire up 70.5% of private sector employees, an absolutely astounding number, and contribute 57% of the industry value added by business. As an economy, our success is heavily related to the success of SMEs. Politicians are able to boast about employment figures, and how well Australia’s economy is doing, but if they aren’t able to fix issues for SMEs it is just empty rhetoric.
SMEs have had a rough few years. The global economy has come out of recession, and there is still a lot of uncertainty in capital markets and credit liquidity. Lending has tightened over the last few years, and that has put a lot of small businesses in a position which they haven’t previously been in. A third of SME’s with external finances find it hard to access finance.
We’ve talked a lot about the regulations surrounding P2P lending and crowd sourced equity funding. Without repeating myself, the Government has taken very slow and cautious steps when dealing with P2P lending and CSEF. P2P lending has allowed SMEs to access external finance, relatively easily as well. On Marketlend and most other P2P lenders, the marketplace system rewards SMEs who are compliant, and provide as much information as possible. It allows individual investors to diversify in what they believe in, whilst bolstering the Australian economy. But it hasn’t really been recognised by the Government, yet.
In addition to this, most SME owners are not financially literate. I suppose this brings up a major issue in Australian education. We aren’t being taught the right things. Schooling should bring in education about finance as soon as possible. It doesn’t have to be extreme, but it has to happen. By high-school, students should know what their money is worth, the idea of compound interest and many other things. Most students should have a general understanding of the banking system and accounting by the time they leave. This could seriously aid the establishment of SMEs everywhere. So many people don’t know where to begin, and how to learn finance, whilst those who do benefit heavily from this knowledge.
Reform is needed. We need to seriously look at how we’re approaching SMEs. On a short-term basis, cutting the red-tape and allowing P2P lending to be more freely done is important. On a longer term basis, we have to look at how we’re educating our population. Many SMEs aren’t run by University graduates, they are run by high-school graduates. We should be learning these things as soon as possible, not a few days before their tax returns are due.
Online lending and its cost on business
As the online lending industry grows out of a worldwide economic slump, it is starting to get a little crowded. With 200 or so different providers that offer credit to smaller businesses, competition is becoming more fierce and prevalent. One of the bigger names in the market, OnDeck Capital, deals with a drop in shares following a less-than ideal financial forecast, and the industry is feeling the heat. However, this stress may be exactly what the lending industry needs to clean out the mess.
Many online lenders are now more akin to payday lenders, that have annual percentage rates reaching 50% or more. As there are many untrustworthy lenders out there, it can be troubling for small businesses to know where to go. Moreover, as the industry starts to get more crowded, there is a greater need for a clearing out of the industry of these unscrupulous business lenders. Ironically, Marketlend business is flourishing partially because of small business owners realising the costs of the online lender after the loan is taken out. They work with Marketlend to obtain a more competitive and risk diverse solution. This is because the interest rates are transparent, similar to the banks and obtaining the risk diversity of several investors instead of one. For example, we recently refinanced one client, where the lender obtains all the day’s takings right into their account and after receiving their payment, distributes the proceeds of his business back to him two to three days later. This caused delays in his cashflow and difficulty in knowing the rates they were charging. Marketlend has seen that some of the funders of these online lenders have been unable to fund Marketlend loans as they have a much higher interest rate threshold.
This shakedown may come sooner rather than later, as banks are opening their doors to small businesses once more, and the government speaks of introducing legislation similar to the national credit code for small business owners. As the alternative lending industry blossomed through the bank’s financial crisis, it is difficult to gauge how it will fare with a healthier finance infrastructure. A general consensus amongst experts show that as the alternative lenders have yet to deal with a ‘down cycle’, it is untested ground for them. As a result, many alternative lenders are scrambling to become more appealing.
Alternative lenders are hoping to examine things such as rent payment histories, or a borrower’s social footprint to indicate risk for a loan. However, these new credit scores are yet to be tested and may cause some serious problems for business owners should economic conditions take a turn for the worse. Another problem would arise as smaller lenders may extend credit without proper risk assessments. This could potentially cause an increase in the number of defaults on the books.
It is likely that the alternative lending industry will see substantial amalgamation over the next year, as smaller lenders cannot keep up with the changes required. The good news, though, is that this should remove many of the high-interest loans currently out there. Initially, this shrinking of the industry may cause problems for small business owners, however in the long run it will make for a fairer business environment.
These days, innovation in Australian industries is rife
It often seems that we don’t know where to look without seeing a new start-up business or investment opportunity. Your funds no longer need to go into a huge company, either. Most of the opportunities afforded to you allow you to invest in far smaller businesses instead.
We’ve seen the rise in power of Uber and Airbnb, which are set to disrupt the taxi industry and the accommodation market respectively, and new stock market innovations such as Acorns AU, which lets entry level players enter the trading game by simply investing their petty change.
When you’re looking to grow your holdings and invest in growth – whether in peer-to-peer methods or by investing in start-up business – there are a few things you need to keep in mind. It’s clear that smaller players are entering the market more and more. Individuals are able to grow their capital exponentially, starting with a relatively tiny minimum investment amount. No longer is aggressive growth the sole field of multi-nationals. Now, singles can play the game, too, without the backing of a massive company – in fact, it has become a whole lot easier to enter the market and start trading.
Start small and diversify large
As the playing field has expanded hugely, you are no longer restricted by minimum spends and you do not have to stake all your money on one player (who may lose their stock market footing). Instead, innovations in investment opportunities mean you’re able to pay a smaller initial fee and see your revenue come in straight away. Paying a smaller initial sum means you’ll have more leftover to put into other investments, too. It makes no sense to place all your investing power in the one basket. Instead, choose a few companies or individuals to invest in so that, in the case that one doesn’t work out, you have some to fall back on.
Now, this wouldn’t be possible if you had invested everything you have in one place, would it? Complete risk transparency Especially with peer-to-peer lending, you’re able to see the terms before you settle, meaning you can see your expected financial growth before you start.
Unlike the big indexes such as Dow Jones and NASDAQ, which can take a tumble without anyone predicting it, you’re able to predict your revenue in clearer terms. And with start-ups growing at the rate they are, you’ll see a business grow from tiny to potentially multi-national – and reap the profits as well.
Composite lending, marketplace lending hybrid
With alternative lending becoming a more prominent part of modern business, it is important to stay abreast of changes in the industry. Composite lending is a mixture of different models and brings with it a great deal of benefits from marketplace lending.
Composite lending as a model combines two common models: balance sheet lending and marketplace lending. In effect, it brings in the benefits of both to the same model. Balance sheet lenders focus on specializing their loans, using shorter term high rate loans or merchant cash advances. Generally, these types of loans focus on profitability over a short period of time. Alternative lending lowers the risk of investments by transferring it to investors, but drops the overall interest rate of the loan. Composite lending as a model hopes to bring these both together.
By combining the parts of the balance sheet model with marketplace lending, the composite model creates a bridge between the two. The model retains part of the portfolio on the balance sheet funded by the company’s capital. This is done while using marketplace lending to obtain outside investors to finance the rest. These two models, when brought together, can offset the risk while maximising returns quickly.
If you ask a composite lender why it is a better choice, they will tell you that moving forward from a balance sheet to this model of composite lending helps every rung of the ladder. The initial company sees a high return on their portfolio, while still collecting fees from the newly originated portfolio. As a result of the newly originated loans being sold to investors, the lender doesn’t have as much risk associated with the portfolio too. This brings great benefits, and it allows for massive scalability with marketplace lending.
Bringing in composite lending allows for a level of flexibility that businesses have never experienced. It is easier to add new products to portfolios, as well as enter into new avenues and markets using the portfolio. This can make your portfolio look healthier and ultimately, appeal to new investors. Even better, by using the balance sheet statistics as its measure of success, balance sheet lenders can justify the worth of the portfolio to new investors.
This composite model of lending creates a plethora of benefits from both marketplace lending and balance sheet lending. This combination helps with scalability as well as lowering the associated risk within the portfolio. As the two models work together, composite lending creates a path to squeeze the best out of both approaches. However, regulators and detractors are not so positive about this type of lending.
Here are some results composite lending can lead to:
- a) Selective “cherry picking” loan exposures offered to investors,
- b) Delivering higher risk loans at lower margins to investors;
- c) A margin squeeze on investors, e.g. giving them the loans with lower margins
- d) The balance sheet lender taking the more profitable margin loans
- e) A lack of transparency between investors and composite lender as to what loans are funded by the lender.
- f) Complexity in the advent of a liquidation where a borrower may have loans on the balance sheet and in the marketplace.
As a result, investors must be careful when considering an investment in a composite lending platform; they need to understand the incentives for the lender to keep the loans on the balance sheet, when to sell to investors, what is the selection process, how conflict is managed, the reporting structure, and realization process.
As is always the case, an investor needs to perform his due diligence when investing. The more complex the structure or the more greater control by the lender, leaves an investor vulnerable to unscrupulous participants in the composite lending market.
Marketlend does not support or discourage composite lending. Furthermore, Marketlend does not run a composite model at this time. Marketlend does invest in every loan on its platform.
Innovation isn’t a fad
As new ideas and businesses enter the market, their influence within their own respective industries decreases. However, conservatives often re-assure themselves by believing that successful innovations are ‘fads’.
They believe that innovations are only popular due to speculation, and they’ll die out as quickly as they entered. The taxi industry is probably praying for a change in the wind to blow away Uber and other ride-sharing apps. Banks and investment companies are waiting for the next ‘recession’ to come in, and demonstrate that peer to peer lending, aka P2P lending is, again, a fad.
This way of thinking isn’t unique to the 21st century. I’m sure that the radio industry believed that television was a fad; I’m sure people believed that computers were a fad, and the list goes on. Often, industry conservatives sit on the wrong side of history. Personally, I don’t believe their insecurity is unwarranted; no executive wants to believe that they are becoming irrelevant. However, the dismissive rhetoric that these conservatives spread is dangerous.
Innovation is a corner-stone to our society. It has consistently increased our standard of living and continues to do so. However, it is fragile and must be nurtured. High barriers to entry dissuade start-ups. Some industries seem impossible to penetrate, until they are penetrated. The taxi and financial industry share this commonality; it seems impossible to change something as established as the taxi industry or the financial industry.
But it has happened. P2P lending is offering something that banks aren’t able to offer; they are cutting out the middle-man. But reducing the complexity of the banking system, investors and borrowers are able to safely interact with each other. This is not something pinned to economic success; it isn’t something that will simply fade away in the next recession.
Many financial conservatives have brought this point up, that P2P lending will until the next recession. However, often people forget that almost every financial intermediary is under-fire within a recession. Something of the largest financial institutions, Fannie Mae and Lehmann brothers, have crumbled in a recession. It is often greed and risk that destroy financial intermediaries within a recession, and these are not exclusive to P2P lending.
As we enter an age where financial technology becomes increasingly relevant, we must remember that the core failings of financial intermediaries are not necessarily based on their processes. We must avoid dismissive rhetoric, and ensure that we continue to encourage innovation rather than shun it.
Innovation is about making our lives easier, we don’t use the internet to bank because we think it is trendy, we do it because it is easier and save money. Initially it may be cool to use Uber or get a peer to peer loan but you are not going to keep doing it if it doesn’t make things easier and saves money.
Recently I used a P2P currency provider and I admit it was very cumbersome, however I did so with the hope that going forward it will save me money and make it easier. It actually did.
It was unfortunate they could not make it easier first time, and maybe in the future we will see that part solved through innovative solutions and more competitors.
This brings me back to what the Government might want to consider when promoting its innovative policy, that is the reduction of complexity and making it easier for the target, SMEs to access the funds and support they need.
For example, there is no reason to make the process of gaining a grant so cumbersome that the only business who apply are those with time on their hands to do so.
When you talk to SMEs they will tell you that is the biggest issue they have, they have no time.
A competitive advantage: How Australia can start leading the world in innovation
The Government’s first step towards incentivizing start-ups is the tax reform. Personally, I believe this is a great method of attracting angel investors. The tax incentive will be a 20% non-refundable tax offset on investment capped at $200,00 per investor, per year, and a 10 year capital gains tax exemption for investments held for three years. This is a great step in the right direction, but what really creates an ‘era of innovation’?
To first analyse this, I’ve decided to look at one of the most successful start-ups ecosystems in the world: Silicon Valley. The Valley’s prosperity and success was based on several factors: state of the art Universities with great funding, a large amount of venture capital, and a consistent amount of Government spending within the area. Silicon Valley had an enormous competitive advantage for start-ups than almost any area in the world. Great minds, plentiful and willing angel investors, and Government expenditure attracted start-ups to utilise the new research developed across America.
I am not advocating for Australia to replicate Silicon Valley, rather, I am advocating for Australia to continue to develop a competitive advantage for investment and innovation. Moving to the United States or Europe should never be a pre-requisite for a successful Australian start-up. We should look inwards to develop a competitive advantage. Consistent investment in education and technology are key staples to developing a similar environment to Silicon Valley.
Australia is a resource based economy; the majority of our exports are resources. We’ve enjoyed a high standard of living, and an extremely powerful economy proportionate to our population. China’s high demand for resources has allowed us to have a very cruisy ride through the GFC but our ride might begin to have some bumps.
An important but scarcely used statistic is economic complexity. Economic complexity is the measure of production characteristics, essentially demonstrating how complex and versatile our exports are. Counties with a high-level of economic complexity are not immune to recession or lulls in the economy but they are not entirely pinned to the success of a few countries. Australia ranks 71st in economic complexity, ranking as one of the lowest OECD countries in this list. We need to change. Fast.
Innovation is a great way to increase the diversity of our exports. We are already seeing Australian start-ups like Atlassian change the global perception of Australian start-ups, and if the Australian Government is able to efficiently respond and facilitate investment and creation, we might see an insurgence of successful Australian start-ups.
The Turnbull Government is on the right track, but we need consistent effort put into developing a competitive advantage. The movement towards an ‘innovation era’ cannot simply be empty rhetoric or PR tool to use for an election.
Submission to Financial Innovation and Payments Unit, Financial System on CROWD-SOURCED EQUITY FUNDING
Marketlends Submission on Amendment Schedule 1 to the Corporations Law (Crowd-Sourced Funding) Bill
Is Australia up to scratch? Diversify with peer to peer lending
A look at how the 2008 financial crisis changed the way policy-makers use monetary and fiscal policies.
It’s a bold statement to say that Governments always learn from their mistakes. But, for the most part, they at least attempt to learn from their mistakes and the outcome is generally positive. However, what if a Government got off scot-free and they didn’t really have to learn anything? This is the case for Australia, but it is not that simple.
Pre-crisis monetary policy was heavily based on one target, inflation, and one policy instrument, the policy rate. It was a heavily one-dimensional and naïve approach to the nuanced and dynamic 21st century economies that exist today. The assumption being that the policy rate could be manipulated to ensure a stable inflation rate. The stable inflation rate would then lead to a stable output gap. However, after the crisis occurred in 2008, policy-makers realized that this was not enough. Firstly, they realized the relationship between the policy-rate and the output gap was not as strong as they initially expected. Secondly, a stable inflation rate and output rate does not necessarily ensure that the financial sector is stable.
This has resulted in a global rejuvenated focus on macro-prudential policies in order to stabilize the financial sector. This regulation can take many forms, there is no instrument to stabilize the financial sector. In Australia, we have already seen this with the enforcement of higher capital to credit ratios in the larger banks.
However, is this enough to control the credit market?
Credit is an aspect of the economy that is often over-looked. It was an excess of credit that created a bubble that eventually burst and caused the 2008 financial crisis. Basic macro-prudential policies can prevent this, but is it enough? Is it possible to efficiently enforce regulation on “too big to fail” banks? This was another lesson learned in the crisis; private banks act in self-interest and cannot be trusted to act responsibly with regards to the national and global economy. Post GFC, we have seen the banks focus on residential mortgage lending with little to none in the small to medium enterprise (SME) lending. A large question mark looming over many heads is whether Governments who were not heavily affected by the GFC will learn from these mistakes.
What does this mean for you, the investor?
I think a basic investing principle to decrease risk is the concept of diversification. It is never a wise concept to invest in shares, or property or both and say I am diversified and protected from any downturn.
Fixed income, either securities, loans e.g. peer to peer lending or corporate debt, is another way to diversify. For many, investing in fixed income is complex and at times hard to understand, but it doesn’t need to be. The simple concept of lending to a SME or a person by participating in peer to peer lending platform, Marketlend, and Ratesetter to name a few that are available to all investors and that are accompanied with loss protection, will give you that diversity. With the added benefit, at least you know where you are invested.
Under the current government, we are heavily reliant on the Chinese economy, we haven’t really diversified and the economic complexity of our exports are low. We also lack the lessons learned in the GFC, and our policy-makers are scared to enforce a set of fiscal policies that include macro-prudency. This raises some questions. Is our economy stable enough to withstand a recession? A steadily inflating credit market in both China and Australia is beginning to loom over us; are we up to scratch? Is your investment portfolio exposed to China, and if so, how much? Comically, there is a suggestion in the press that we should begin exporting baby milk and this will in some way compensate for the reduction of mining exports. Ask yourself, is this a real solution and is it long lasting? Can’t the Chinese make their own high quality milk formula in the future? It is not like Iron, it doesn’t come from the ground.
Ironically, one of the largest peer to peer lending markets is China, maybe we should import more of their ideas and technology than export our natural resources.
Turnbull’s endeavor to develop an “entrepreneurial” Australia helps peer to peer lending
First, I think we need to do a recap of the last decade of the Australian economy.
To begin with, we went through a mining boom that is often referred to as “once in a generation”, housing prices have increased rapidly, and productivity growth has been relatively stagnant and lower than the productivity growth rates achieved in the late 90’s and early 2000’s. However, over the last five to six years, the mining boom has started to peter out and our standard of living is declining at an increasing rate. In addition to this, the steady increase of housing prices has led to a redirection of capital. Banks are handing out increasingly high amounts of capital in the form of mortgage.
Unfortunately for the Australian economy, housing isn’t a very productive asset. By placing large amounts of capital into the Australian housing market, it has increased rates and decreased the available funds for the most productive use of capital, Business.
So what does this mean?
It means our government has to think of a plan to “pick-up” the Australian economy or at least break the fall; there is no doubt that our standard of living is going to decrease, but the Government is gearing up for damage control.
Enter Turnbull. The government and the coalition understand the situation they are in, they’ve been rather slow addressing the issue for the last few years and have been heavily relying on the strength of our exports. However, as the election clock ticks, the Government is growing increasingly weary of the gloomy future of the Australian economy.
Turnbull proposes to implement several changes within the Australian business landscape to ignite this “ideas age” or a re-focus towards business and innovation over minerals. This proposal includes relatively straightforward but relevant policy changes, like a shift from the original three-year bankruptcy period to a one-year bankruptcy period. It also includes investment into research, approximately $150 million per year, something that was lacking throughout the Abbott government.
Turnbull also looks to decrease the heavy cost and risk of start-ups by offering a tax off-set for angel investors, and developing an entrepreneur visa to attract qualified professionals to Australia.
The most relevant policy change for Marketlend is the establishment of new laws that enable crowd-sourced equity funding with a turnover and gross assets of less than A$5 million. Albeit Marketlend is not an equity funder, it does offer trade credit in a similar debt crowdfunding or peer to peer lending methodology. Investments will be limited to a maximum amount of $10,000 per company, per year. This is a direct acknowledgement of the growing efficiency and opportunities that crowd-sourced financial technology can establish.
Marketlend sees the advent of more businesses being able to obtain equity, a positive incentive to growth of the trade credit market, because these businesses will need working capital or debtor finance solutions. As Marketlend’s platform offers both working capital, and debtor finance solutions. Particularly, the Marketlend platform is able to offer debtor finance for the buyers of startup businesses if the buyer is approved by Marketlend’s insurer. A growth in this market means a growth in Marketlend if it can obtain a share those opportunities.
Overall, the changes that the Government is proposing are a step in the right direction. However, many more steps are needed to pick-up Australia’s productivity and to establish an economy that can sustain its competitiveness in the future.
Finding the capital to kick-start your business – invoice financing
Starting a small business can be one of the most exhilarating experiences a person can undertake, which is in part due to the risks and challenges that stand before you. Once you’ve made the decision to tackle the challenge and begin your journey, it becomes quite urgent for you to be able to get your hands on a lot of capital. Unfortunately, not many people share the same enthusiasm that you have with your business and won’t be eager to hand over their funds to help you out. But why is it easier for big businesses to receive massive loans, whilst your smaller loan is mulled over by the big banks?
Bigger businesses are less likely to fail
How has a business grown big? By being successful. Successful businesses generally equal a healthy cash flow. With clear profit results, it’s a lot easier to convince a bank to lend you money. It’s like going to a horse race and having an untried two-year-old take on the defending champ. If you were a gambler, you would go with the tried and tested choice. At the end of the day, as exciting as a new talent is, potential doesn’t mean bills will be paid on time.
Fixed Cost
One of the problems that is completely out of your hands is the cost associated with a loan. Some of the costs are the same, whether you are borrowing a hundred thousand or a million dollars. Because of this, obviously a bank’s margin will be higher on the larger loan. This one is completely out of your hands, and we wouldn’t recommend you borrow more just to appease your bank.
Expensive evaluation
It is much harder to obtain a small business’s records for analysis. This could be because they haven’t been well kept, aren’t available to the public or aren’t exceptionally flattering. Without a certain degree of transparency, you are again deemed to be an excessive risk, simply because the money lender doesn’t know what it’s getting itself into. This factor you can control, but it may not help you if the numbers aren’t on your side either.
Even if you do manage to secure a loan, the process is nowhere near as quick as a larger competitor. This is why more and more small businesses are looking to marketplace lending, peer to peer lending or debt crowdfunding as their new solution.
Leveraging invoice financing to fuel business growth
Cash flow can make or break a small business. You don’t have hundreds of other customers to fall back on to pay their invoice and get you out of a tight spot. You need all of your customers to be pulling their weight, and paying their invoices as they become due. That’s in an ideal world, and more often than not, the business world is not ideal. You have to be ahead of the game and think outside of the box to get your hands on your hard earned money to grow to your full potential. This is where debtor or invoice financing comes into its’ own.
You can rely on your sales
Big businesses gain their security through their assets. Their multimillion dollar property would be the most obvious example. You don’t have that (yet) so your sales really are the life blood of your business. Relying on your own hard work, rather than a non-current asset will grow your business at the appropriate rate for you.
Your business grows with you
When businesses survive the initial startup, they can fail in the growth stage. Success can allow a bank to lend you too much money, which can prove to be too much of a temptation for some. Invoice financing controls the growth at which you are expanding. You don’t have to predict growth; you can only expand as your bank account does. Invoice financing is a much safer option; especially if this is the first time you’ve created a startup. Invoice financing doesn’t mean you have to give away your customers. Your customers will realise that you are funding your business and still you as the supplier. A good invoice financing solution will result in improved customer relations as there is more communication with them by you and the invoice financing solution provider.
You don’t have to offer discounts
A strategy many businesses utilise to guarantee early payment is a discount. You are essentially underselling your product in exchange for an earlier return. With debtor financing or invoice financing, you’re guaranteed the cash flow, and can now afford yourself the luxury of time to receive full payment. This way you are not undervaluing yourself, and receiving the full payment which is rightfully yours.
Personal relief
This one is possibly the reason that will allow you to sleep a lot easier at night. Your personal property won’t have to be used to help finance your tougher times. If you’ve had an exceptionally busy month, which will take a few months to recover all of your payments, two months can be a very long time for your business to live on promises. Instead of having to delve into your own pockets, your invoice financing will leap to your rescue, and ensure you live to fight another day.
Don’t go for a quick solution
When you start looking for invoice or debtor financing, what you are essentially seeking is someone to buy your invoices with ease, without administration hurdles and most importantly at a competitive price. You may find that there are many different solutions that may look cheap at the time of offering, but when you take into account service fees, selection criteria and the short-term nature of their financing, you will find there are only a few offerings that make sense. What makes marketplace lending or peer to peer lending solution of debtor or invoice financing attractive is that you set the term, the rate you are willing to pay and also there are no hidden fees. Your investors are your peers, not some large multinational that may leave you when the times change or they have a restructure or strategy rethink. With marketplace lending you get to say these are my terms and invest now to take advantage of a great opportunity, not what are your terms and can you please lend. More importantly, marketplace lending sets you up for the future because you build an investor base that supports you in your business.
Administration
The biggest downfall of many small businesses is that when they start out, they have only a few people doing tasks or they do it all themselves, but as they grow the administration tasks expand and leave these people bogged down with administration tasks. This is where Marketlend, a well establish marketplace lender also known as a peer to peer lender, not only assists you with the improved cashflow with debtor financing or invoice financing, but also handles all the collections, payments and legal processes.