November 16, 2023

Several business-to-business (B2B) credit managers and bankruptcy attorneys from Lowenstein Sandler recently convened with the American Bankruptcy Institute (ABI) Subchapter V Task Force to exchange invaluable insights gleaned from their cumulative experiences in Subchapter V cases.

These credit managers, who are members of the esteemed National Association of Credit Management (NACM), played a pivotal role in orchestrating this collaborative dialogue, shedding light on critical matters within the Subchapter V landscape.

The debt ceiling for Subchapter V increased from $2.5M to $7.5M in total noncontingent, liquidated, secured and unsecured debt as part of the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act. NACM members testified that with this increased amount, which will sunset without Congressional action on June 21, 2024, Subchapter V bankruptcies have expanded to include medium-sized businesses rather than only small businesses.

A primary concern of trade creditors is the inherent imbalance created by Subchapter V of the Bankruptcy Code. For a qualifying small business debtor, Subchapter V creates several advantages over the traditional Chapter 11 process. A creditor’s committee is not appointed in a Subchapter V case absent exceptional circumstances. In lieu of a creditor’s committee, a Subchapter V trustee is automatically appointed to facilitate the development of a consensual plan of reorganization.

Subchapter V also promotes the speedy resolution of cases under the subchapter by requiring that the debtor in possession file a plan within 90 days after the bankruptcy petition is filed. The Subchapter V process also is less expensive for a debtor, as the small business debtor is not required to pay quarterly fees to the United States Trustee’s Office. Additional advantages bestowed upon a qualifying Subchapter V debtor are that the debtor maintains the exclusive right (and requirement) to file a plan throughout the case, and the debtor need not satisfy the absolute priority rule as a condition of confirmation. Instead of the absolute priority rule, a Subchapter V debtor must dedicate, at a minimum, the amount of its disposable income for a period of three to five years, providing an easier path to cramming down a plan on unsecured creditors. However, the creditors who bear the burden of those benefits are left without the most significant protections of Chapter 11 and, to protect their interests, would have to incur the same costs, and sometimes more costs because of the absence of an official unsecured creditors’ committee, as in a traditional Chapter 11 case. 

During the testimony presented in October, Mike Mandell, corporate collection manager at Ryder System, Inc. (Miami, FL), said, “We hope the information we provide today will offer a different perspective on Subchapter V and our recommendations for the commission are considered as they move forward.  I have yet to see a Subchapter V plan succeed. The Subchapter V plans that Ryder has been involved in have failed where the customer stops paying.”

Credit professionals testified that debtors should not be able to use Subchapter V to prolong the life of a company that cannot successfully reorganize. A primary concern of trade creditors is the inherent imbalance created by Subchapter V of the Bankruptcy Code. Subchapter V allows small businesses to avail themselves of substantially all of the benefits of a traditional Chapter 11 case through an expedited process at a minimal cost to the debtor. 

“We do business with companies across all industries and sizes, so we have seen quite a few different types of bankruptcies, including many Subchapter V cases over the last few years,” said Jeff Weber, director of credit at Uline (Pleasant Prairie, WI). “These claims can be made over three to five years, so it creates a burden for us to collect and ensure payments are being made.”

Among the potential solutions recommended were to put mechanisms in place to ensure adequate notice to unsecured creditors such as free access to ECF/PACER for Subchapter V cases or to require the debtor to hire a claims/noticing agent to maintain a fee online docket. Another recommendation was to enhance the debtors’ disclosures and proofs for confirmation; something along the line of requiring the debtor to file a declaration under oath disclosing what financial difficulties led to the filing and what the strategy is to rehabilitate the business. “The lack of disclosures and the reduction of available information for creditors in this subchapter is a major pain point,” said Conrad Ragan, director of corporate credit risk at PepsiCo (Winston Salem, NC). Trade creditors are the lifeblood of our economy, currently providing approximately $5.6 trillion of capital to businesses in the United States, most of which is extended on an unsecured basis.

NACM members advocated to ABI’s Task Force that consideration be given to adopting provisions that would increase the likelihood of recoveries for involvement from creditors, such as requiring an impaired consenting class or an unsecured credit or class to vote in favor of a Subchapter V plan. NACM members suggesting requiring a minimum recovery or convenience class for unsecured creditors in order for equity holders to retain their interests and directing the U.S. Trustee or Bankruptcy Administrator to appoint an Official Committee of Unsecured Creditors (or similar entity) if the Subchapter V case exceeds a certain amount of debt or insider debt. NACM members also advocated that the role of the Subchapter V Trustee be enhanced by introducing mechanisms to ensure the Subchapter V trustees are conducting the necessary diligence of debtors' plan projections, projected disposable income, best interest of creditors test, and— ultimately—the feasibility of plans. Providing statutory investigative powers to the Subchapter V trustee to vet prepetition secured claims and claims against lenders and insiders, much like an Official Committee of Unsecured Creditors would, goes a long way to correcting some of the issues.

“The credit managers who participated in this opportunity gave the entire B2B credit industry a voice when it comes to Subchapter V,” said NACM President Robin Schauseil. “We are thrilled that the Subchapter V Task Force took the time to listen to our members’ concerns.”

NACM’s Credit Congress & Exposition started off as a mission to bring together credit professionals from across the nation to network, learn and stay informed about the latest changes in the credit world. Now, it is more than just an annual hub of credit knowledge—it’s a catalyst for career growth and professional development. By attending Credit Congress, you and your colleagues will have the chance to not only grow in your careers but contribute to your company’s overall financial success. Once you decide that Credit Congress is for you, it’s time to convince senior management of the same by building a compelling case.

Gain Approval from Senior Management

Vendors to solve a problem: You can add your personal touch by building your own schedule with your goals clearly listed. Whether that’s by PowerPoint, a one-on-one meeting or a letter. “List some of the vendors that are there and if your company is going through a particular issue, present them with three different vendors attending Credit Congress that could offer a solution to the problem,” said Adam Aune, credit manager at Butler Machinery (Fargo, ND) who attended Credit Congress for the first time this year.

Lean on a colleague: Sharing the experiences of colleagues who have previously attended is helpful in forming your argument for attending Credit Congress. Erik Bullock, credit manager at Walcro Inc. (Bloomington, MN) said his predecessor was a part of NACM but had never been to Credit Congress. “I learned about Credit Congress through our local affiliate, NACM North Central,” he said. “So, I talked to my manager about attending and they were fully supportive. My argument was that I don't know a whole lot about credit management and that I will have a lot of huge takeaways from this conference, and they allowed me to go to Credit Congress for the first time this year.”

Rare in-person networking opportunity: At NACM’s Credit Congress & Expo, credit professionals can meet and connect with other credit professionals through various networking events. The newfound connections can provide insight on any issues or lead to business opportunities in the future. “You make connections with people in a similar business or who have a similar customer base you can reach out to during challenges or if there're new changes in the industry,” Aune said. “You’re able to build relationships with vendors at the Expo Hall that can help with different facets of your business, whether you're looking for more technology or you want to see what products can benefit you and your company.”

Maintain and earn certifications: The best way to convince upper management is to make them aware of the intangible and tangible benefits of Credit Congress. NACM offers two certificate courses during Credit Congress: Business Credit Principles, which satisfies a Credit Business Associate (CBA) course requirement, and Financial Statement Analysis 2: Credit and Risk Assessment, a preparatory class for the Certified Credit Executive (CCE) designation exam and also a core course for the Certified Credit and Risk Analyst (CCRA) designation.

By maintaining and earning professional certifications, credit professionals can grow in their credit knowledge and skill set all while establishing credibility in the industry. Henley Rowe-Anderson, CCE, CICP, revenue risk manager at Carrier Enterprise LLC (Charlotte, NC), has attended Credit Congress for the past five years, taking credit-related courses to obtain his CICP, CBA and now his CCE. “I have progressed in my credit career and have received numerous promotions in the credit field at various companies since attending my first Credit Congress,” he said. “I attribute my success to having wonderful mentors and managers who advocated for NACM and encouraged me to attend and to take the necessary courses to obtain my credit certifications.”

DeAnna Leahy, CCE, NACM chair and corporate credit manager at Sunroc Corporation (Orem, UT), attended her first Credit Congress in 2009 after striking a deal with her manager. “Because of the economy, it had been a rough year for my company, and they had put a freeze on travel,” she said. “So, I asked my boss if I could attend Credit Congress where I was to be honored with the CBF of Excellence National Award and in return, I paid half the expenses. I also signed up for the CCE review session that year, which was helpful when I went to sit for my CCE exam. Afterwards, I informed them about how attending refines credit skills and increases credit knowledge, minimizing risk and saving money for the company in the long run. Not to mention, it allows credit professionals to do their job more efficiently.”

Education investment: Rowe-Anderson has his team members print out the sessions and courses that will be offered at the conference from the NACM website. “NACM does an excellent job providing a full schedule of the Credit Congress, which you can share with upper management and sell how this experience will be a wealth of knowledge for you and your credit team.”

At Credit Congress, credit professionals have the opportunity to learn about all the different facets of credit management. From financial analysis and bankruptcy to international credit and leadership. “I made sure to attend a session on the tools for writing a credit policy as I am new to credit and my company did not have a credit policy yet,” said Kristin Farmer, credit and collections manager at HMI Glass (Louisville, KY), who attended Credit Congress for the first time in June. “I attended a session on how to improve cash flow where I learned about using rebate programs and one about networking, which was really helpful. I also learned about how to make better credit decisions overall.”

Attending Credit Congress makes employees more informed about the latest the latest trends in the credit industry and important changes in the economy. Staying current on the latest credit industry and economic trends helps credit professionals remain competitive, especially during a tumultuous economic period.

Finding new hires: Many companies continue to struggle with staffing shortages. NACM’s Credit Congress is the perfect place to meet other credit managers who may be looking for a new job. You can gather contacts in case your team has an opening in the future.

When you return: Be sure to write your boss a thank you letter and include some points that you learned while at Credit Congress. This will help with the following year when you need to convince them all over again that Credit Congress should be included in the budget.

This year marked NACM’s 127th annual Credit Congress in Grapevine, TX, with nearly 1,200 attendees present. And the upcoming 128th Credit Congress will be held in Las Vegas, NV from June 9-12, 2024. Will this be your first time attending the conference? Network with others ahead of time and connect with credit managers who will be attending by joining NACM’s Mentors & Milestones Program or one of our virtual Thought Leader Discussion Groups.

Israel’s almost $500 billion economy—the most developed in the Middle East—was healthy for most of 2023. Then on Oct. 7, Hamas launched an attack on Israel that quickly became the deadliest of the five wars fought between the sides since Hamas seized control of the Gaza Strip in 2007. It’s been more than one month since that attack and the economic implications are beginning to surface. Customers in Israel are paying on average 41 days beyond terms according to FCIB’s October Credit & Collections Survey. Nearly three in every four credit managers say payment delays are increasing due to the Israel-Hamas war, supply chain issues and unwillingness to pay.

“Besides the disruption of normal economic activity, there will be an adverse effect on logistics as there is now only one port open for shipments into Israel,” said Mark Zavras, CICP, director of credit at Sub-Zero Group, Inc. (Scottsdale, AZ). “There will be a slowdown in shipping lead times, and supply chains could feel the constraints of the war due to shortages and lack of working population.”

Shipping in and out of Israel will only continue to become more difficult as conflict continues. “We’re fighting a major slowdown in our area,” said Christopher Finley, CICP, global credit analyst at Club Car LLC (Troutman, NC). The global conflict has been troubling for middle eastern businesses that Finley’s company works with. “I’m skeptical of taking cash in advance because we don’t know if the containers are going to get there or if we’ll have to pay for freight back,” Finley explained. “From a credit risk perspective, I don’t think we should be doing anything without having the CEO or CFO sign off on those shipments because of how high risk that situation is right now.”

The shekel has sunk to a 14-year low, prompting Israel’s Central Bank to sell $30 billion of foreign-exchange reserves, The Economist reported. “Since war is not just fought by military forces, but also by economic ones, an important question hovers over all this activity. Can Israel withstand the economic pain? The country’s clashes with Hamas since withdrawing from Gaza in 2005 do not provide much of a guide.”

Israel’s economy faces a major challenge amid the war—employment. The country’s armed forces have mobilized more than 360,000 reservists, or 8% of the country’s workforce—a bigger call-up than in 1973—and Gaza has lost at least 61% of its jobs. “Every order from Israel is being closely reviewed and decisions are made on a case-by-case basis because everything is evolving so quickly,” Melvin Ucelo, CCE, CICP, global credit manager at Franklin Electric Co. Inc. (Fort Wayne, IN) said during the October Global Credit Thought Leaders Discussion.

Economic forecasts for Israel have been cut from 3% to 2.3% amid disruption. More than half of all businesses in Israel are facing revenue losses beyond 50%, according to data from Israel’s Central Bureau of Statistics. The Gaza war has cost the Israeli economy nearly $8 billion with an additional $260 million in losses with each day that passes. An economic fallout is expected for “many years to come,” the United Nations labor agency warns. Extensive duration of Israeli occupation of the Gaza Strip along with controversial judicial reforms can cause economic growth to stunt in the long term.

The economic implications of the war are likely to bleed beyond Israel’s borders. Customers in Lebanon are paying on average 38 days beyond terms with 50% of credit managers saying payment delays are increasing due to the war and central bank issues.

“We’re already looking at what the conflict means for travel operations such as closures of airports and shipping lanes in those areas and neighboring countries,” said Drew Franklin, CICP, global director of credit and risk management at CP Kelco (Atlanta, GA). “Though the intensity in different locations is hard for us to understand as a privately held company, we already have a dower economic sentiment in North America, Western Europe and even China now. The more conflict and global entropy we have, the worse sentiment we’ll have at the consumer level which reaches to the business level, ultimately coming back to us as a B2B organization.”

Throughout the intense conflict across the world, credit professionals are finding ways to stay connected to customers they are dealing with in Israel, Lebanon and even those in Ukraine. Credit professionals dealing with customers in Israel say they are considering secured terms, LCs or cash-in-advance terms. Developing a close relationship with customers through consistent communication is especially important.

“In terms of politics, the West seems to be mostly supportive of Israel, so I don't believe there will be much of an impact on the world economy in terms of global trade alone,” said Vidushi Bonomaully, senior manager of billing and collection at Ecovadis (Ebene, Mauritius). “However, the currency market could further fluctuate during these times of geopolitical uncertainty in several areas, coupled with the inflation and the Ukraine-Russia conflict.”

Further escalation of war can possibly bring Israel into conflict with Iran, meaning a spike in oil prices that could reach up to $150 per barrel and a global growth drop to 1.7%, according to Bloomberg Economics. As we have also seen in the past, Middle Eastern territories are key suppliers of energy and hold the biggest shipping passageways. For example, the Arab-Israeli war of 1973 led to an oil embargo and its impacts led to years of stagflation in industrial economies. GDP shrank 4% in the West Bank and Gaza just in one month of the war, sending more than 400,000 people into poverty, according to a report from the United Nations.

The aftermath of war and tensions between countries can take a devastating toll on the global economy. Russia’s invasion of Ukraine, China’s tensions with Taiwan and now the Israel-Hamas conflict all show how geopolitical disagreements drive economic outcomes. “The rise in debt to support this war as well Ukraine will have a negative impact especially if these wars continue indefinitely,” Zavras said. “U.S. credit rating has already been downgraded due to the large debt burden that we carry. Billions of dollars in aid and equipment are funded by the U.S. to support the wars. This will not get any better as these wars continue.”

The November FCIB Credit & Collections Survey is now open. Complete the survey to receive the results delivered directly to your inbox and to earn CEU/ICEU participation points.

In the dynamic and ever-changing world of finance, it is imperative to stay ahead of the curve and ensure agility is built into your business operation. More and more businesses have integrated global business services (GBS), an evolution of the shared services model that controls the delivery of business support functions to the core business through multiple service delivery models on a global basis.

According to the Shared Services and Outsourcing Network (SSON), GBS has become one of the most popular areas in corporate development for driving optimized performance across multiple business support services. “While shared services have traditionally been viewed as a support function to the broader business, the GBS model positions itself as a business partner that can help the organization meet strategic objectives,” the article reads.

In a survey by SSON Research & Analytics, in 2023, most respondents list cost or efficiency as the top strategic priority for GBS and shared services organization (SSO) (73%), followed by service excellence focus (60%) and value or provision at 36%. Other priorities listed include effectiveness (35%), customer view (34%), agility or organizational flexibility (34%), risk or risk reduction (15%) and compliance (14%).

“It is prudent for companies or management to look at cost mitigation or cost-cutting activities when you’re expecting a recession or at least a downturn in the economy,” said Tom Bangemann, managing director at ConAxia (Planegg, Germany), during a live NACM webinar, Future of Finance Evolution for Global Business Services. “Agility or organizational flexibility, where a company can respond quickly to internal or external changes to an environment, most likely will increase in priority.”

Benefits of Integrating More Automation with GBS According to BlackLine

• Working capital: achieve significant cost savings and release cash.
• Higher engagement: free your people to focus on value-added activities and business partnering, rather than chasing customers down for remittance.
• Control of processes: create a fully transparent, auditable, scalable and SOX-compliant process that significantly reduces the risk of human error.
• Improved customer experience: boost customer loyalty by reconciling customer credit accounts in minutes, so customer credit lines are fully available.

How GBS Streamlines the Order-to-Cash Process

Ultimately, it’s all about having the time to make the data timely and meaningful, said Danny Wheeler, AR solutions strategy manager at BlackLine Systems, Inc. (London, UK), during the webinar. “The only way to make that visible is to automate the order-to-cash process,” he said. “This way, you have access to readily available data and can detect which customer made the payment and what account it goes to. You can also silo the cash application and collections teams, which leads to payments getting paid a lot quicker and fewer payment delays. This decreases rework, improves the cash process as the collections team are not chasing customers for bills outstanding.”

Automating accounts receivable (AR) and order-to-cash processes within GBS and shared services allow for improved departmental organization within a company. Sales are able to see what makes a good customer, such as paying to terms or having fewer queries, Wheeler said as well as who they can trade more with and who costs more for the business to trade with.

The finance team also can benefit by seeing what the real risk is to the business and a customer’s payment history. “It can drive on how you interact with a customer and how you operate as a business,” Wheeler said. “It also enables quicker access to cash and ensures financial stability, provides greater detail on payment forecasting allowing for better credit decisions when extending credit terms.”

BlackLine Systems, Inc. is a proud Credit Industry Partner of NACM. For more information on how to become a Credit Industry Partner, please download our media kit or email Annacaroline Caruso, editor in chief, at This email address is being protected from spambots. You need JavaScript enabled to view it..