Legal Issue: CEO Refused Mexican Sales Without Collection Safeguards
- Industry: Specialty Chemicals
- Scenario: Pre-emptive Credit Management
- Service: Due Diligence & Credit Management
01 | Problem
An Ohio chemical manufacturer wanted to expand into Mexico but their CEO refused to approve the strategy. His concern: “We have no way to assess credit risk or collect if things go wrong. I’m not authorizing Mexican sales until we have a system.” Their credit department had zero experience with Mexican business credit reports, legal collection options, or enforceable payment structures. Without this infrastructure, they were locked out of a $2M annual opportunity.
02 | Solution
Before making any Mexican sales, the company engaged HMH Legal for:
Credit Management Setup:
- Due diligence process for Mexican prospect companies
- Credit limit recommendations based on Mexican business intelligence
- Culturally appropriate payment terms
Secure Transaction Framework:
- Legally enforceable sales agreements and credit applications
- Proper use of Pagarés (Mexican promissory notes that enable accelerated legal collection)
- Robust terms of sale that enhances the creditor’s position
Collection Partnership:
- Pre-negotiated no-win/no-fee arrangement for any future collection needs
- Quarterly review of receivables aging
03 | Result
Year One Performance:
- $2.1M in Mexican sales approved and completed
- Average DSO: 68 days (vs. industry average of 95+ for cross-border sales)
- Collections needed: 2 accounts totaling $47,000
- Recovery rate: 100% through amicable resolution
- Write-offs: $0
The company’s CEO now views Mexico as one of their most reliable export markets. They’ve budgeted $4.2M in Mexican sales for Year Two.
"Before working with them, I had some anxiety about doing business in Mexico, as I felt I didn’t fully understand the potential risks involved. They did a great job revamping our documentation, but what really impressed me was the time and effort they spent helping our local credit department “sell” these new documents internally to the sales team, many of whom were initially apprehensive the stricter docs might hinder sales. HMH allayed those fears, and now, knowing that we now have a strong set of documents for credit sales, it has taken away a lot of the concern about credit risk. We now have confidence in granting or increasing credit knowing that we have the necessary tools to fully protect the company’s interests."
Services
Our services in Secured Transactions and Litigation early on of the sales process or upon negotiations or restructure of a loan or debt, are key to prevent or properly address a problem situation, as the one pointed out.
