Michael Yasny of Money Consultants explains what to do — and what never to do — when CRA comes calling. Built for Canadian SMB owners who need real answers, not panic.
GROWTH PILLAR: Leadership & Ops
WHO THIS IS FOR: SMB owners / Solopreneurs / Startups / Any Canadian business owner carrying CRA arrears
WHAT THEY'LL GAIN: A clear picture of how CRA debt happens, how to negotiate payment plans that actually work, and the one move that protects your business when the government comes knocking.
Most business owners don't plan to owe CRA. It happens quietly ~ a rough month, a missed remittance, a bad debt that pulls cash in the wrong direction. Then the calls start.
Michael Yasny is the founder of Money Consultants and a Toronto-based alternative financing advisor with over 30 years of experience. He works with startups, growing companies, and businesses in financial trouble — arranging everything from purchase order financing and factoring to CRA debt solutions and debt restructuring. When the bank says no, Michael finds another way.
In this episode, Michael walks through:
Michael also shares the story of a client who lost everything by not listening — and what could have saved him.
Connect with Michael:
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Next Steps
Bernie (00:18)
Question of the audience.
Have you ever gotten a call from CRA and felt your stomach drop? You're not alone. Tax arrears are one of the quietest and fastest ways a good business can unravel. Not because the business failed, but because the owner didn't know the rules of the conversation they were already in. Today our guest is going to change that. He's going to walk us through what to do, what never to do.
And how to protect your business when CRA comes knocking, because the wrong move, even a well-intentioned one, can make things significantly worse. If you're a startup, a growing business, or you've been hit a rough patch and CRA balance is climbing, this episode is made for you.
Our guest today is Michael Yasny from Money Consultants. He's a business advisor.
Financial fixer and founder of Money Consultants, a Toronto-based alternative financing firm he's been building for over 30 years. When the bank says no, Michael finds another way. He works with startups, growing companies, businesses in financial trouble, arranging everything from purchase order financing and factoring to debt restructuring, private mortgages, and CRA debt solutions. He's not just a consultant, he's the calm voice in the room when numbers get messy.
Michael's also the published author of, and his book is, So You Want to Start Your Own Business? Am I Out of My Mind? Is available on Amazon and it's exactly as honest as it sounds. He lives with by the belief that the bank isn't the key to your financial success, but financing is. Connect with Michael at moneyconsulting.ca, find him on LinkedIn as Michael Yasny, or follow him in or follow him on Instagram at Michael.yasny.
That's Y A S N Y. And if you happen to catch him on a golf course, oddly enough, we were already discussing that today. Don't be surprised if he's also reeling in a fish, too. Apparently he's landed over 500 between holes. Michael, it's actually a real pleasure to have you back again. Thank you so much. Do you have a favorite quote or saying, sir?
Micheal (02:11)
Thank you very much for having me. it's a pleasure to be back and hopefully I'll have a little wisdom for your audience.
Bernie (02:18)
Perfect. So you've been doing alternative financing for over thirty years. You know, i i it's interesting. Growing up, you know, the the bank seems to be the place to go get the money. And obviously it's not the only place. What brought that realization in into focus for you? And and you know, how did you get there?
Micheal (02:37)
I got there very strangely because my father wanted me out of the business I was in, which was a fur accessory business, and he had heard about this new business called factoring. And he told me, why don't I go speak to the individual that owned the company? And for about a year I'd go in every week or every two weeks, speak to him, but I wouldn't join his company because I loved what I was doing. Then it came to a situation that my business
Wasn't gonna go forward as the way I wanted it to. And I was getting older and it was a part time business. So I went in, I decided, okay, I'll give it a shot. And I was there for about a month when I realized I was born for this business. I'd never heard of it before, but it took me a month to realize it was business, it was numbers, it was money. And I was just I just learned everything about it from that day on. everybody's job because I knew I'd either buy into this business or I would
start my own or I would buy one of buy into one of the business that came to us for financing. So I wanna learn everything about business and it was open to me to learn and that's what I did.
Bernie (03:39)
So you founded money consultants in twenty twelve and obviously you saw the gap. How big a gap is there in in the the finance world? Like how much of a blind spot did the banks leave us?
Micheal (03:50)
Well, the banks are pretty straightforward. They charge the least amount, so they have the most rules. And not everybody qualifies for it, even if they have a good business. because the bank is looking for hard security. Now it could be real hard security, collateral mortgages, cash deposits, things like that. Or it could be that you have security in your business from being in business for a number of years and being profitable. But what happens when you're starting a new business? And you have good clients.
Well, the bank says that's terrific, but we're not lending you any money. But others will. Others will finance you. And financing and loans are two different things. So people have to understand financing and a line of credit are two different things. And I try to bring forward the right kind of financing to the situation. And sometimes that's more than one financing at the same time. So really when I'm as a one-stop shopping for all the different financings out there.
As opposed to a company that just does leasing or just does factoring or just does private mortgages, I do it all. So I can help with by just sitting with the client and going through their business and their needs and coming up with a plan for today and one that won't interfere with their growth down the road, because sometimes I've walked into situations where a company has taken financing from one area and it's prevented them from getting financing somewhere else. They couldn't get out.
So I make sure that they can get out to go into the next financing as their business grows.
Bernie (05:11)
Is there if s someone's not familiar with with that whole construct, right? And what what you're offering, unless of course you've been in the business for a while, how do you know it you're on target? You're you know, you've got a a bona fide person in front of you that's offering this? Because it's like I go to a lawyer, you know, they there's they're they're you know, they've gone through school for that. The banks, they have the bank regulations from from the government. What what what are the
tells that you're you've hit the right mark for someone and to provide that advice to you.
Micheal (05:40)
Well, I've that's an interesting question because it's something that I wrote in my book, How You Pick Your Broker, Your Advisor. And that is you want somebody that's earned a living in the area for the last three to five years. That's the first thing. Not part-time, that's what they do full time. Two, what kind of experience and associations they have with all the different financing? So ask them, do you do this kind of financing? And they should know or do all of the different financings that I've mentioned.
And that's how you can start the conversation. Th the other thing is that you really want to watch out for how they're going to charge for the services. Some services get charged up front, some services get charged on on success, and some services are actually paid by the lender. So when I do factoring, I'm getting paid by the lender. The client doesn't pay me. So it's really discussing that. But if somebody starts asking for a lot of money up front,
That should be a sign that you shouldn't go forward. now I have had clients where I've asked for some money up front and they're concerned about me taking money, not providing. So sometimes what I will do is I will take a lot less or nothing, but charge them a lot more if I'm successful. So I could charge, you know, say five thousand dollars and they say, Well, this and that. I said, Okay, well, pay me $2,500. But if I'm successful, you pay me another seventy five hundred dollars.
And that gives them a choice because I have an incentive now. How much is that upfront money? Sometimes, like I said, it's nothing because I know whether I'm gonna be able to be pretty successful on providing that financing. And the only time that I'm not successful, when I think I will be, is when the client lies me.
So they forget to tell me something. And that becomes a problem. So I've also learned it the hard way that you gotta charge something up front, or clients don't think you're real. People prefer prefer to pay some money up front. I don't need you to charge a lot. I just need to charge a little that you're not going somewhere else because I've actually lost deals where I have not charged anything up front, and they've gone to people that have charged money up front. And then they couldn't deliver. But so
I've learned that lesson. So I don't like to look for a lot of money up front. Some things I have to charge. So when we talk about CRA, I do charge up front for that because once I fix the problem, it's gonna be hard for me to get paid.
Bernie (07:52)
So sp speaking of the double, I I say that jokingly. So what should a business do if they get that first call? Like they s they selling calls and it's usually a collections call, right?
Micheal (08:04)
From a collections,
either an agent that's been assigned to your file or just the general collections calling. It all depends on the size of the amount of the debt. So the first thing I tell people, pick up the phone. And if you can't pick up the phone, call that number back as soon as you can. Before you call back your family, call back the government. It's really, really important to show the government that you're interested in fixing the problem because it's a serious problem.
And the more you do that, the more they work with you. When you hide from them, that's when bad things start to happen to you.
Bernie (08:37)
So what are the what are the first words like i i if if they come knocking and then they'll obviously say hi, they'll confirm your identity to make sure they're not talking to the talking to s you know, someone doing a food drop off. what are what are the next pieces of advice that you would give? Like, you know, if they say hi, you owe X amount of money. What do you do then?
Micheal (08:56)
Well, first thing is that I've never run into a client who didn't owe the money the government's asking for. Okay. They all know. So now it's about the government is now going to demand the money.
And now this is where the conversation starts, because if you owe the money to the government, you generally don't have it to pay them.
So, and the other re and the big reason you don't have it is the government doesn't work like a business. If they did, I would say that 80 to 90% of the debt that companies have would not exist with CRA. 80 to 90%. And the reason being is that when people get in trouble with the government, because it is the easiest place to borrow money, you don't have to apply and you can't get turned down. You just don't send in your trust funds. And what happens in a normal business, if you don't pay your bill in 30 days,
Your your supplier calls you up. Where's the money? You may get some more supplies, but it's going to end fairly quickly, and they're going to be on top of you to get the money. But with the CRA, they may not call you for a year, year and a half, two years. Now you owe so much money you can't get out. And what's happened after two or three months where you might be able to make the payments, you're so scared that you owe money that you don't make any other payments. So now you have a big debt.
The government wants the money. Where's the money? Why'd you take the money? Well, you took the money so your business would stay in business. And that's what happened. And that's why people do it. They don't do it to rob the government. They do it to stay in business. So now the government's gonna now, it's like I said, demand the money. You don't have it. They say, Well, we want you to go to the bank and borrow the money. And if you could go to the bank and borrow the money, you wouldn't owe them any money.
So they say it as a demand, but it's not a demand, and you can just say no.
There's no there's no consequences to you saying no. The reason you say no is there's no benefit to you. It's a negative for you to go to the bank and get turned down because the government will say, Go to the bank, if you get turned down, we want to see the turned down letter. Then they'll say to you, in some cases, okay, we want you to go to your family and friends and tell them that you owe money and they have to lend it to you. And if they don't, we want to know why they're not lending it to you. Again, something you don't have to do.
But the government says it's like it's a demand and you're scared because you owe the money. Like I said, nobody's ever come to me that didn't owe the money. And now they're demanding this money. How are you going to pay it?
And they're wanting the money, they want it for six months and six months. They might want to say, okay, we'll go 12 months. the maximum they'll say they go is two years, which is not true. And that's where you need somebody to negotiate this for you, the repayment structure for you. Nobody other than a trustee can get your debt lowered and the interest removed. But what people, you know, there's really not too many people do what I do, but what I do is I rearrange a
Payment schedule that you can afford, not one that CRA demands. You have to be able to afford, because if it does, if you don't, now the bank account gets garnished. You could get garnishment letters sent out to your clients. Now they're told you may owe $100,000. Everyone gets the same letter, send in $100,000. Well, now those people aren't going to do business with you anymore because they don't meet, they can't they don't want to do business with somebody who could be out of business. So now the government can ruin your business.
Now they don't do that that fast. And they only do that when you don't cooperate. They just want to collect the money back. So they want to have a reasonable repayment schedule that you can afford. Now, they want to pay faster, you want to paid slower. But you owe interest that you can't deduct. So you do want to pay it off as quickly as possible. They're also going to demand that you stay current. Current is filing on time and sending in the money for the current obligations.
The arrears come second.
Now, you have to pay the money back. You're obligated to pay the money back. What are your choices? Well, your choice is making a payment arrangement that you can afford so that you can do it. Sometimes I make deals that are graduated payments, so we'll do one payment for six months and we grow it, you know, we increase it for the next six and so forth for next three, four, five years. Now, there are things that are coming with that if you go over two years. There's other information you have to give to the government, but we I can arrange that.
They're not going to arrange it with you directly, but I will arrange it because there's certain things I can say to them that make them accept the deal. You can go to a trustee and put your company into bankruptcy or do a proposal. But now you have a problem with your business. And depending on if you want to continue the business or not. So there's things that you can do, but the most important thing is call the government back.
Get someone to help you, whether it's your accountant. Now, most accountants have no experience dealing with CRA other than what CRA tells them. Like I've had a number of clients go to their accountant, accountant calls up CRA, and CRA says, Well, we want the money this way. And then they go back to clients. Well, CRA says you have to do it this way. Because they don't have the experience and they don't want to spend the time. And rightfully so, it's hard to charge their client for doing this. It's the phone tag back and forth between the government and
and s and the accountant and it makes it very difficult to get something settled. So when you use somebody on the outside, that's how you solve your problem, because you have to solve the problem or your business is finished.
Bernie (13:44)
How does a person get themselves in arrears? Is is it and and what what element because obviously it's either taxes, payroll, or they took a special benefits. I'm I'm thinking like with a pandemic, right? the yeah. Yeah. But how the how do you find yourself here's a lump of cash, right? There's transactions happening, and if if you stay on top of it.
and I and I get that if you have if you're bleeding somewhere and your business is bleeding somewhere, you you want to staunch the the the flow, right? So you can sustain yourself. But is is it bad planning? Is it you know, should they come talk to you going, Listen, I'm I'm running into a payroll issue here. my my crew is getting paid. but you know the
all the benefits that that are owed to the workers that are collected by the government, whether it's provincial or federal, are s you know, still, you know, not getting remitted. Is is this something they should come talk to you before they start jamming themselves in the corner, or is it it's usually only always after the train wreck?
Micheal (14:42)
Well, that would be terrific if they called me beforehand, but nobody's ever going to do that. So they got they have to they should call us when they start getting into trouble, but nobody calls really until the government calls them because they don't want to talk to the government. They don't want to s tell the government they owe money. They don't know what's going to happen and they're scared. Yeah. So when they get that phone call is when you start looking at it, because the government is now looking to get paid, but they're not going to close your business down. The government does not close your business. They don't sell your business.
They will garnish your bank account, which now puts you in a position that you can't pay anybody. And that's a problem. And they do that. And what they do is not every time, but most of the time, it's quite sneaky. So now this happens over a long period of time before they do it because it's not that easy for them to put the garnishment in. But they'll put the garnishment generally in place at the end of a week, Thursday or Friday, most of the time. And then mysteriously,
That agent that you're calling up is on vacation for the next five, six days. They want you to sweat it out that you can't pay anybody. And what are you gonna do? And then they try to make a deal with you.
Now, everything they say to you is not necessarily correct.
Other than the amount of money you owe. Now, in some cases where you owe money and you haven't filed, they will assess you the maximum amount, which they should, because what that does, it gets you to the table to show why you don't owe a hundred thousand, you only owe sixty-two thousand. So they're okay. You're gonna show us the proof that with the deductions and you only owe sixty-two, and then we want our sixty-two or our six hundred or our million dollars.
So now they've got that problem. Now we have to sort it out. Because once that garnishment happens, it's hard to get off. It comes off. We can get it off, but it's hard. And it's now put a big problem with your business. you can't pay anybody, you can't pay your employees, and it's a really a big I d I can't stress enough how big of a problem. And how did they get into this? Well, because of COVID, some of it is the government's fault.
Absolutely the government's fault that these people got into trouble. Because the government said, you just have to file, you don't have to send any money in right now if you don't have the money. So people didn't. Then all of a sudden they owe $100,000, $300,000. It's now time to pay. And the government calls up. Where's our money? You should have been keeping it in the bank account. Now they owe the money. They've been spending it to stay open to pay their employees. Now the government wants the money. So that was one of the ways they got into trouble. Other is
Just business happens. You get into trouble. Somebody doesn't pay you. You know, you get a bad debt in your own business, and you got your employees to pay and your rent to pay and the lease on the equipment. Because if you don't pay those things, you don't have a business to pay back the government. So the government's the last one you pay because nobody's calling you up for the money until it's you know until it's a year later or longer. So people use the money as
As okay, I'm gonna pay them next month. Then next month somebody I'm gonna pay them the following month. Then it's three or four months. And I say, Well, I can't afford to pay them because they'll find out I owe them so much money and they're gonna want the whole fifty thousand dollars or hundred thousand I owe them. So they don't pay, and all of a sudden it's a year and a half later and they owe three hundred, four hundred thousand dollars. It also makes a difference which debt you owe, whether it's source or HST. So if you have one dollar and two dollars in bills,
100% that send the money to source deductions. Every single time. Send it to source. Because I can help you more, and a trustee can help you more if you owe HST as opposed to source. Source is the one you do not want to owe. And if you do all that, you owe both of them when I make a deal, the majority of the money that is sent to the government is for source.
Bernie (18:08)
Four points.
Micheal (18:09)
Source is the the deductions from the payroll, payroll deductions. So I can make an arrangement that the majority of the money goes towards source debt. And what we do is we generally pay maybe a little bit more than what the interest is on HST. Now, when you're making those arrear payments, you better write on your checks or on your on your automatic payroll that's when you go to the bank to pay it, that it's for arrears.
Because if you don't, the government will put you in default on your arrear payments because they'll put all the money to the current stuff. Now you got to go sort it out, but meanwhile, you got into trouble to begin with again with the CRA because you weren't making the payments, all because you didn't write the checkout properly. And you just put arrears for a particular year or just tax arrears or source arrears or whatever it may be. And you stay on top of that. And as long as you stay current and you make your arrear payments properly.
You'll get out of this mess. And then if you have a problem with your arrear payments, you pick up the phone and call me, and I call up the agent, and we have a discussion that we're going to have to suspend the payments for one or two months or whatever, and tell them why. And sometimes they'll ask for some information and sometimes they'll just be okay. And they'll go by the history. But their job is to make to get the money in. They want to help you get the money in. They have to help you get the money in. But
They don't have to be as cooperating with you as they do with me.
Bernie (19:25)
It's interesting. Do you find that the the people you're dealing with at CRA are because I've heard this from from an accountant. He goes, depending where you're in in the structure, if if if it's a more senior case, the it's a more senior person, th they have a stronger background. The more junior it tends to be more new to the new to the industry, from the CRA side. Do you find that they that
makes is there like a threshold where I I owe a hundred dollars? Yeah, is this something they're gonna twig on or is it like, you know, is it of substantial amount or is it relative to what you normally have as an income?
Micheal (20:01)
That's an interesting question. I would say when you start getting into a million dollars or more, it's a different agent that you're speaking to, a different collection agent that you're speaking to. when you owe less than that, you're getting somebody that can be brand new or can be a very seasoned individual. What I have found, other than three times, I have found that the agents, once the agent knows that I know what I'm talking about and there's no more fooling around with what the demands are, we become friends.
Because my job is to get the debt paid, and their job is to get the debt collected, and we work together. And I find them to be pretty reasonable to deal with. I've had three instances that they were unreasonable. there's two magic words. I won't give out the magic words, but there's two magic words. And when I threatened the agent with them, we never heard from the agent ever again. Now it doesn't mean the file disappears.
Just somebody else will start the collections, but that could be a year or two years later. They're so busy that it can be it can be more than a year before anybody gets assigned to your account. I have one client, they have an HST that was audited. It's now 14 months, 15 months. Nobody's been assigned to the file as a collection officer, even though the government has assessed through their audit what's owing, but it has to get assigned to somebody and that hasn't been. So they are slow that way. But
Other than and somebody did something recently and you know, her her team leader sort of protected her a bit, but the garnishment was taken off very quickly because she did something she should never should have done. But other than that, those three times in the last 15 years, everything most of the agents are very cooperative trying to solve the problem. But they have certain rules and certain things they're supposed to say, and until you know better, they're gonna go down that line.
Their job is to put a little bit of a scare into the client. The client did take trust funds. They did take trust funds.
Bernie (21:44)
It's interesting. And and I and I appreciate the the the the the concept of trust funds. For our audience, what is a trust fund?
Micheal (21:51)
Trust fund is money that you've collected on behalf of the government. So when you do payroll, you know, the individual is getting paid $1,000 a week, their paycheck is $700. $300 goes to income tax, it goes to CPP, it goes to unemployment insurance. That money is money you've taken on behalf of the government. You've withheld on behalf of the government to and you're supposed to send it in. With the HST or GST, you've charged that on top of the product.
The client has paid you for that and you're supposed to take that money and send it to the government because you've collected it on behalf of the government. And when you don't, you've taken funds they've trusted you with. And that's why they call it trust funds.
Bernie (22:30)
Perfect. Is there a distinction between federal, provincial or municipal s situations where, you know, there are taxes, there's property tax, there's provincial sales tax, which is usually embedded inside the HS state.
Micheal (22:44)
Right. So the HST has eliminated the provincial government from calling up looking for the money because now it's just the federal government looking for the money and they give the provincial their share. property taxes, you get that registered against your house, and it's not coming off. They can eventually sell your property, collect the taxes. Those taxes are certainly in first place ahead of mortgages, just like a condominium maintenance fee is ahead of the mortgages.
The property taxes are head of the mortgages. nobody comes to me to solve the the property taxes. Nobody's ever called me up for that. and it's also usually not that huge. They could owe fifteen, twenty thousand dollars and it'll get fixed eventually. If they called me, I'd help them, but it's not really worthwhile for me to help them, you know, what I charge. And but you know, sometimes I've had two clients that wanted nothing to do with the government.
and paid me even though they only owe twenty five thousand dollars approximately each. They did not want to speak to the government. They had their reasons, so I helped them. But most of my clients owe for they make sense, they owe forty, fifty thousand dollars, but I have clients that owe over a million dollars.
Bernie (23:47)
So PST, I know that sometimes PST is specifically applied to certain products. So is is there any provincial tax that sometimes has to be reconciled to that keeps them
Micheal (23:58)
Well
I I don't get that call. I could, but you know, I'm in Ontario. Most of my clients are in Ontario. But in the ones that are out west, it's usually just this GST. So in in Alberta, it's just GST 'cause, you know, I don't believe there's a if there is a provincial tax, no one's ever asked me to help them with it. So it would be different arms. Now it used to be provincial tax in Ontario and I would it would be two different people to speak to. But
That's you know, if that's the case, then I speak to two different people instead of one.
Bernie (24:28)
Do you ever end up going through tax court? through this process? Does it does it get to the point where the person's going, no, I don't owe you the money, you're wrong and the the the government's going, yeah do, yeah. Do you end up in tax court?
Micheal (24:41)
I don't because now you need a tax attorney. So I've referred maybe in the years to a person to a tax attorney, maybe three times. because there's other problems with that situation. one where a guy was a director, but he wasn't really running the business. He was just a director by accident on the business. So the tax attorney actually got him off the debt of the company, and it was just really the the other director who was running the business. So
only a only a lawyer can go to tax tax court.
Bernie (25:09)
So what's a good habit for a business owner to to dodge this bullet ahead of time? you know, w what what should they be doing? You know, obviously they don't come to see you ahead of time going, I'm starting a business, guide me, Juan Kenobi. keep me out of keep me out of harm's way of myself.
Micheal (25:26)
Okay, first thing I tell people is you go to a lawyer and you incorporate. And so in my book, I have a team. If the team is a lawyer, so a commercial lawyer, not your brother-in-law, the real estate lawyer. Okay. You go to a commercial lawyer and you get a company incorporated. So it gets done properly. It's not expensive. You choose an accountant. The question I ask an accountant, whether it's the right accountant or not, and that is, should I incorporate right away?
If the accountant says yes, that's your accountant. If the accountant says no, find a new accountant. Why do I say that? Incorporation is the first line of insurance that your business has. And when you don't, if you're not incorporated, you are now personally on the hook for everything. Even if you did not sign a personal guarantee for your rent, you're still on the hook because you're a sole proprietor. So you want that security in that corporation. Like I said, it doesn't cost much. The extra
Accounting is not much because you usually do a notice to readers, so that's not expensive. You still get to deduct things. So it's not really this crazy. It's going to cost me so much more money. So that's those are the first things. Now you really want to understand the kind of financing you need.
And get that in place first. And if that means you don't start your business for another six months, you don't start it for another six months. And here's an example. These two guys that I knew, they decided to open up a restaurant, but they didn't have any money. So they bought things, everything was used, they bought had to rent a small space. They couldn't bring in something that they should have done, it would have earned them a lot of money.
And they just should have waited six more months to raise another $5,000. It wasn't a lot of money, more they should have got. And I think they would have had a better chance of succeeding. So the restaurant was busy, but they didn't have a big enough restaurant to make a living for two people. So be capitalized properly. Understand financing, where you're going to get it, how you're going to get it, and what c how you're going to pay it back. Because a lot of times at the beginning, you're borrowing money from friends and family. Well
Don't say I'm gonna pay it back in six months.
And if you if if you tell me you're going to pay it back in two years, don't ever pay them back in a year. Unless you have double the amount of money you owe them. Why? Because if you run into a hiccup, you can't go back to them without them saying, Well, why do need more money? What happened to your business? Now they're scared. Because you paid it off, now you need more money. So pay it off accordingly. Pay the interest for two years. If at the end of two years you owe the money to pay it back, pay it back then. You need that cash reserve.
Okay. Like say here's an example I say to the government all the time. So I make a deal for more than two years. And he said, Well, we're going to come back at six months and see if the client can afford to pay more money. And I say, Well, you have the right to come back and look at the books and everything. But the client's not paying you any more money. So let's make a deal right now. If you want more money or the opportunity to get more money down the road, we're not making the deal and we're going to option B. My option is ex it's A or B, there is no C, there's no negotiating.
A is you accept my deal, or B, we go to a trustee. So they always take A. But they also say we want to see in six months. And I said, my answer to them is that no. And this is the reason. If the person, let's say he's in a restaurant, needs a new stove for $25,000 and he's paid you too much money, are you going to give him back the excess money? And they go, no. I say, well, now he's going to go out of business because he paid you too much money. So you're going to have to live with the deal we're putting in place. So he's paid off in three years or whatever the term is.
And they always accept that. But they have the right to ask for new paperwork every six months just to see how the business is going. But I never allowed the client to pay more money.
Bernie (28:45)
Is there a particular industry that you're finding over the last decade or so that is normally having this as an issue? I'm gonna I'm gonna assume maybe restaurants, but you know, are there are there other other verticals that are experiencing this or is is it just widespread?
Micheal (29:03)
It's it's restaurants is a big percentage, you know, they could be 25% of the people. There's a lot of mid-market businesses in that one to five million dollars in revenue that really get into this trouble because their business is so up and down. It's a roller coaster. And what these companies don't do, which they should, and I understand why they don't do it, but they should do it, is they don't pay attention to their market and
in the fluctuation in the revenue by laying off people. They're so worried they're gonna get business and not have the employees to do it that they keep paying employees for longer than they should. And they should really cut down on on their labor or other expenses. the second thing that gets them into this trouble is that they they don't charge enough for their service.
Okay. especially when they're new because they're so concerned somebody will pay for it. But what I tell people, it's none of your business how much you charge, how much your clients will pay for your service. It's only what you need to charge in order to stay in business. And if nobody will pay it, find a new business. Because if you're not charging enough, all it is is a long term bankruptcy.
And there's also perceived value. Sometimes if you charge more money, people will use your service when if you charge less they don't want to do it. They don't it's a perceived value. I had it in my fur business where I just charged more money and it sold more.
Bernie (30:17)
So is this all wrapped around commodities as opposed to services? Like and I and I I I say services, you can have someone that's coaching, and then you have commodities, I make widgets, and then you have SAS, you know, software as a service. D d is it usually commodity driven or is it a mix of that?
Micheal (30:33)
it's any business that is growing faster than their financing can handle. How's that for an overall picture? It's these businesses that are going too fast for their financing that gets them into trouble because they're taking monies coming in to keep the business growing and growth because in their mind, well, if I got more business, I'll be able to pay the debt. I don't want to turn away the business because then I won't have the money to pay the back debt. So that just it snowballs.
And the problem with the interest that the government charge, not that it's cheap, not that that it's expensive, it's not tax deductible.
And that's a problem. Now, the other thing that people should do, even when they owe the money to the government, I can't stress this enough, and I promise you nobody will do it. But I can't stress it enough. Even if you owe money to the government, file. Even if you can't send in the money, file every month your source deductions. File your HST. Now you can go to the account, you might not have to file the source every month because you we can figure at the end of to do out the T force lists, but.
Really, you don't want to get charged penalties. That's a big problem. Penalties are really big. Far more in principle, much more than the interest. I had one client, the interest was $183, and the penalty was $700. Okay. So five, but if you file on time and don't send the money in, all you owe is interest. You don't owe the penalties. Yeah, it might bring the CRA to you a little quicker.
But still they're going to be six months, twelve months later. Because nobody reviews that. They see it was filed properly. So you've got to file. And again, $1, $2 in bills, source, source, source. Never to HSD.
Bernie (32:06)
If you found that they they've come knocking on the door, but they haven't assigned the agent to you yet to have that discussion to do the repayment, would it behoove you then to start making remittance to towards that debt even ahead of time? Or do we wait till they have that conversation? I guess what I'm asking is do you do you kind of you know
Send s sends something on to Caesar, what's due to Caesar a little bit ahead of time, just to have a kinder Caesar, or is are you just you pooched?
Micheal (32:33)
See, I'll tell you, I say no. And this is the reason I say no. Remember, you're saving interest if you do do it. You get no credit whatsoever for it, other than your debt is lower. They don't say you're terrific, we'll help you out more. So the reason I say no is to a just the general collection department. And I call up them. You know, somebody calls me, whatever, I'll call them up. And I'll say when you get somebody assigned and we make a proper deal.
then we'll start making the payments. And they go, well, you should make them anyways, you'll save the interest. I say, I know we've saved the interest, but I don't quite trust the situation. So get somebody assigned tomorrow or next month or whenever you do, and we'll make the payment arrangement with you and we'll get this cleared up. But I want to be in control of the situation, but you do not get any credit. And like I said, you never borrow money to pay the government because you get no credit for that.
Here's a perfect example. And it cost the guy his entire business. He owed
Bernie (33:27)
So they
Micheal (33:27)
a million dollars. And they had a senior person on the file, pretty smart, straightforward, tough as nails. And she kept convincing him he had to go take a mortgage on the house to pay down the debt. And he eventually convinced his wife, which almost led to a divorce. Anybody, anybody that's looking for a second mortgage has to go to their spouse to get a second mortgage.
That's not a conversation you don't want to have. Anyways, he convinced $400,000. He tilted the house up as high as he could. How is he going to make the payments? I don't know. He probably did a prepaid interest, but I don't know how he did it. I said, don't do it. If you do it, you will have no money to run your business. And you'll get no credit for it. They will come back to you the day after for the other $600,000 because it was a $400,000 word. Anyways, he kept getting pressured. He didn't listen to me.
And they took the four hundred thousand dollars and they were right at him the next day. Where's the other six hundred? Now he didn't have any money to keep his business going because he could have got a second mortgage and put the money in the business. And I was showing him how to do it so the government couldn't touch it. And basically he ended up losing the business because he didn't have any money to run it because the government took it and the government wanted the money. So what I ended up having, he had to go bankrupt, personally bankrupt. I don't think he owns the house.
And if he does, then he got bailed out by his family. But i like sometimes you gotta listen to me. Because the government doesn't care what happens to you. They don't care that you sell your house. They care about trying to collect the money.
And here's where I can say that you don't care is that generally when I warn all my clients, somewhere during the three or four or five year repayment period that I set up for you, there'll be a new agent assigned to your file. The files move. And that new agent is going to call you up, not me, but call you up and start demanding bigger payments because they want the file reduced, closed sooner. I said as soon as you get that phone call, you tell them to either call me or let me know and I'll call that new agent.
And we have one phone conversation and just one. And they do not get any more money and they leave the client alone. What they're doing is they have found a client that's paying the bill. And it's a if they call up and ask for more money, that file gets closed sooner. It's better for them. The more files that get closed, the better for them. But we have a deal in place and they will live by the deal. So don't get pressured. But I warn every client that they will get the phone call from a new agent somewhere down the road. And
My service is for the entire time that you owe the money to the government. So it's not just I set it up. All through the next two, three, four, five years, if there's any problems, any situations, you pick up the phone and you call me and I sort it out.
Bernie (35:50)
That is doesn't that's awesome because you yeah. It's a reason why we use realtors to sell our houses because sometimes everybody gets emotional and you don't want the emotional running running rampant, right?
So
After seeing this whole system running for this length of time, would you make any recommendations on you know, if if if government officials listen to this say, listen, this might be a a better working model? Do you have do you have a a construct for that? Or on the flip side, yeah, go ahead.
Micheal (36:17)
Okay, so I have said to many agents in the past when we're having friendly discussions and we're just talking, because I'm really sometimes we have some long conversations about nothing, just general things. And I truly believe it's the government's fault that 80 to 90 percent of the debt is owed by these companies because they do not treat it as a business. If they had a software in place, which can't cost them that much, but how much could a software cost them? Even if it costs them $10 million, you're talking about billions of dollars that are owed to the government.
If they had a software in place that popped up that said this account is 30 days overdue for remittance, 60 days overdue for remittance, they could assign a c an agent to it. Hire more people to do it. You'll collect more money. What happened was in 2023 they hired a tremendous amount of more agents. In 2024, in the middle of it, they started laying off those agents. Nobody knows why. You said I spoke to one agent.
We were talking about he says, No, they just laid off a whole bunch of agents. And he says, I can't believe we just collected one billion dollars in the last six months on bad, you know, on outstanding debts and they laid off people, which means our job is not much harder. Where I used to settle deals as little as one phone call in the maximum of three weeks, now it can take two or three months before it's settled because the agent has so many files. They just can't get back to getting back to you fast enough.
Settling it up, making good go through their team leader and getting that all done. And it's because they don't have enough people working for them. You're collecting money. This is an avenue of revenue for the government. Have the government set up the software so these people don't get into so much trouble. Maybe they can borrow the money from the bank if they only owe 20,000 instead of 200,000. Right? So I don't think they run it like a business. If they ran it like a business, they wouldn't have anywhere close to the problems they do. And
You know, I certainly would set up the business for them and do the collection privately for them, but they don't want the public to know about people's, you know, business. But people have to remember, even if you bankrupt your company, you still owe all the money because you have a director's liability.
So you don't get off the debt because you're going to, I'll just bankrupt my company and I won't owe the million dollars. No, you still owe the million dollars, but now you owe it personally. And even when you don't, even when you're still own company, they can garnish by putting a lien on your properties or any properties they know of. So you could have a lien on your house, which prevents you not from renewing your mortgage, but from getting a new mortgage or getting any extra financing on your business. Because anybody sees the government there, they're not going behind the government. Yep.
So these are all problems you have that you can fix if you call me, you know, and get the right information and we solve the problem. You have a problem and it's not going away.
Bernie (38:50)
So you work with other other experts, other financial experts. what's a great referral relation relationship look like for you?
Micheal (38:57)
Generally business accountants. Okay, because they have now come to the conclusion that they don't want to spend time with the CRA. As well as that's one, and also their clients are coming to them to help them get financing, get the books in order to for finance, the financial savings for financing. So they can refer that individual to me when the bank says no. Because generally the accountant's gonna set up the you know financials and tell you go to the bank. But
You don't have to accept the bank, because even if the bank is less expensive, in turn they may be more expensive. So in my book, I I talk about a bank line of credit. A company has 100 in cash and a hundred thousand dollar bank line of credit and a sixty-five percent margining. The other company in the exact same business, so apples to apples, has a hundred in cash, but no bank financing, but they have factoring.
The bank charges 3% a year. The factoring company yields out at 45% a year. And I show how the 3% a year with the bank is far more expensive than the factoring at 45%. Because you're not in business to see how little interest you pay. You're in business to make money. So if it costs you more money and interest, but you make more money, then that interest, which is deductible, is less expensive.
And what happens in this scenario is they both sell $100,000 orders to the same clients. They both charge, cost them $70,000 to make a $30,000 profit. But after the second order that the company with the bank financing has gone through, they don't have another $70,000 left in credit to do the third order. And the bank says when you get paid in the next, you know, in 60 days, you'll have money again to do it.
But by that time, they've lost their clients because clients don't want to deal with somebody who can't deliver. But the company with the factoring, every week they sell another $100,000, another $100,000. So at the end of two months or 60 days, they've had a profit. They sold nine times, $900,000 instead of $200,000. They've taken in $270,000 in profit, but it cost them $48,000 in factory. They made $222,000. The other company,
Paid $365, made $59,000 and change, but they have no more clients. So who is more expensive? The 3% that only allowed you to make $60,000 and lose your clients? Or the $48,000 that made you make allowed you to make $220,000 profit after the interest? And you still have all your clients. So how much you pay in interest is not as important as how much money you're going to make. So how much money do you make?
From the interest you get paid. And I get two phone calls that I hang up on because they're not real businesses. One is they call up, they say hello, do you do grants? Now I help with grants. But when that's your first words out of your mouth, I just go no, because you have no chance of success if you're looking for a grant to be your financing. The second one is I could say they say hello, what's your interest rate? I say, I don't make loans, goodbye. Why?
Because if you're calling me up, you've already been turned down everywhere and you have no idea what you're talking about. So there's nothing I can help you with.
Now, when you're starting a business, the best business advice I can give you is experience. And here's what I mean by experience. Just like I said with the factoring, I learned everybody's job. I had a friend, he did was gonna buy a restaurant franchise.
Now he was a very hard worker. So there was no problem with that. He wasn't going to work 24 hours a day. That's the kind of person he was. But he doesn't cook. And he doesn't ever worked in a restaurant. So we were probably in our 20s at the time. Everybody had just graduated university and they're starting their jobs and they're making some money. And he went and got a job at a restaurant. And he said, I'll do anything. He cleaned the washrooms, bust tables, washed the floors, did the dishes.
Started learning of prepping, started cooking, waiter, host, bartender. He did every job for about six months. And his friend said, Why are you working for a minimum wage? And truly the only it's the only smart thing I ever heard him say, I'm not
Bernie (42:38)
Yeah.
Micheal (42:39)
working for minimum wage. I'm getting paid to go to school.
And six months after he did that, he opened up the restaurant. He was the number two restaurant in his first year of that franchise, and I believe number one in the second.
Right? Because he got the experience and he got paid to get that experience. And you need to learn. It's not important for you to open up your doors today. It's important for you to open up the doors when you're ready, financially and experience-wise. So, like I say, people, I cook. I can tell you that I'm a better cook than most chefs in restaurants. However, I have zero chance of being successful in the restaurant business because I know nothing about it.
So, if I really was foolish enough to go into this very difficult business of being owning a restaurant, I would go work for a restaurant for six to twelve months and do every job just like that person did. Because I don't know it. I know how to cook, but I don't know how to cook for 100 people. I know how to cook for eight people, 10 people, 12 people. But you have to be able to do the prepping and everything in time. So it's about learning, and experience is the best way for you to succeed. Why do people
You know, when you graduate from law, you go work for a law firm. You don't usually go out on your own. Yeah. Right? Because you need the experience. You get somebody to pay you. You get somebody to pay you. When you become a dentist, most of the time you go work as an associate. They're paying you. Then you get this foolish idea that you're going to make a lot of money as a dentist because you were just getting paid with no expenses. But it's about experience. And the more experience you have, the better chance you have success.
But if you have to wait that extra six months or a year, you wait it.
You know, it's like there's always another my father always said there's another always another house to buy, there's always another girl to date. So you don't have to get stuck anywhere.
Bernie (44:13)
So we got some dating advice happening here. Michael, I want to say thank you so much for being our guest here today. This this is really a good conversation. And to you, the Knack 4 Business listeners, because you know what? There's some sound advice here and what to understand and what not to do and what to do. So Michael offers a free 30 minute consultation and just reach out to moneyconsultants.ca. It's not a pressure move, and you already know what not to ask them about because it it triggers the yep, nice knowing you, thank you very much.
Follow him on LinkedIn, Instagram, and you know what, grab his book. so you want to start your own business. Are you out of your mind? Well, it's actually am I out of my mind on Amazon. And don't wait till it's urgent and you're in dire straits. even if you're mapping things out, or even if you're going to talk about other things like about leases and leaseholds and stuff like that, he has expertise in that space too. To reach us, on the knackforbusiness.com website. It's knack.
Like knock, except with an A, for the number four, business.com. And we have a web indexer chatbot on there. You can research out past episodes.