Assuming you were incorporated and had a business account - declare bankruptcy and the bill goes away. I don’t understand why you would still pay the bill if you were going out of business anyway.
Why didn't I file bankruptcy? This happened in Australia and declaring bankruptcy was not the right thing to do - for many reasons, not the least of which it makes it much harder to operate as a director of a previously bankrupt company, but in the worst case my bank would have just gone after me as I'd given a personal guarantee.
Even in the United States, most small business loans require personal guarantees which narrowly override the corporate limited liability to make that guarantor liable for that debt if the company doesn't pay. There are some rare exceptions, and possibly more for startups funded by big-name VCs, but I don't know.
Scenario 1: Amazon will ask for the payment (if using cc); the bank will respond there are no funds in the account; Amazon deals directly with the company further directly, not with the bank, eventually getting payment order from the court. If the company went bankrupt meanwhile, Amazon might not get their money.
Scenario 2: Amazon will send the invoice; invoice will not get paid. After due date, Amazon will contact the company directly; bank doesn't even enter the picture, until collection order comes from the court. If the company went bankrupt meanwhile, Amazon might not get their money.
There's no scenario where some hypothetical loan would go straight to Amazon, unless Amazon has some instrument, that instruct the bank to pay them. Something like bank guarantee or promisory note, and uses them before declaring bankrupcy.
I think they were referring to a scenario where Amazon is draining the funds that have already been loaned. Thus Amazon already has their money, and the bank is the one coming after you during bankruptcy.
Not sure how it works in OP's country, but where I live, when you get a loan, you will get a new account. As you draw the loan, you are getting into negative balance; how far you can go is the limit of your loan. As you pay back the principal, you are getting back to zero balance.
So for Amazon draining loaned money, they would have to transfer them to a normal account and pay with debit card paired to that account, with no limit set.
It is not wise to transfer them to a normal account; you pay interest for the balance on the loan account; if you move them to your normal account, you are paying interest for money that is sitting on your normal account.
If they used CC (not debit), then any payment would mean creating a debt, so yes, they would have to pay to the bank. Because bank already paid in their name.
That's why you don't pay large sums with CC, but with invoice + bank transfer, and have a limit set on your cards, when you do.
- control: you are in control, when you do the payment. You can plan your cash flow.
- additional advantages: You also have payment terms, some vendors offer discounts for earlier payments; if your cash flow can handle that, why would you giving up of that?
- liability: with CC, you are getting credit that is drawn at other party leisure. It's you, who is liable for this credit line, even if the other party made a mistake. You are always liable to the bank, never towards the vendors. With bank transfers, every single payment was authorized by you (where by 'you' I mean authorized person at your company) and the liability is towards the vendor, who is not likely to have such a strong position (see Porter's five forces).
- leverage: if another party makes a mistake, they have motivation to correct it. Every company in existence has already received invoices, that are incorrect. Withholding payment until they are corrected is a strong motivator. Without that, you could be left without invoices that can be put into accounting AND without money that you have to account for.
- setting up processes: when you grow beyond certain size, you are going to want to formalize both the procurement, accounts payable and treasury. Having purchasing and payment discipline that are compatible with that already in place will mean less pain from the growth, less things to change.
When we need people in the field purchasing small supplies, we don't want them to handle cash, so they get debit (not credit) cards, with relatively small limits. It is enough for them to get by, but not enough to make any damage of significance. (The exception is fuel and that's what fuel cards are for - basically it has a form factor of a credit or debit card, but works only for fuel, is paired to a license plate and the vendor sends invoice at the end of the month).
Another scenario, where CCs are useful, if you need to pay something right now; you don't or can't want to wait for the order->delivery+invoice->payment cycle. That's fine for consumer impulse purchases, but that should not be a normal way for company purchases.
Of course, if you start a new business relation, some companies would not trust you, that you are going to pay the invoice; sending advance invoice and paying it is fine. In practice, it is quite rare occurrence.
Were they in the US and funded by VCs? That kind of startup probably doesn't need to do this. Unsure about VC-funded businesses elsewhere. Many or even most small businesses without VC funding do take that kind of loan.
The real world is filled with barbershops, daycares, bars, clinics, PVC manufacturers etc
None of them get VC money.
When they need money, they go to a bank and usually have to place a PG in order to get funds.
Tech startups have it easy. Its all equity. You are not pledging your lifetime earnings on a business idea.
Once tech startups lose their upside potential (prob not anytime soon if ever), you will be sitting with the regular folk, those that pledge their skin and life to their business.
If a director becomes personally bankrupt (such as trying to be the good guy and using personal guarantees to take on company debts in an effort to scrape through) then they're banned from running a company until it clears. If they're the director of a company that goes bankrupt, I believe they get 2 chances (companies) before there's a chance of being banned from running more for a time.
Either way it might be nice to keep your options open, depending on your plans.
If that got to the right person on the right day and they knew it was going to kill the company, it seems likely to help. And combined with the fact that it would probably guarantee future revenue way off into the future...
I have never heard of a case where they wouldn’t give refunds. AWS is competing with the 95% of compute that is not running in the cloud (their own statistics). The last thing they want is a reputation that one mistake will bankrupt a business.
We had spot instances with a mistakenly high bid that incurred thousands overnight when the prices spiked. No refund offered.
I know several other companies that had expensive mistakes without refunds. There's probably a complex decision tree for these issues and I doubt anyone really knows outside of AWS.
> I have never heard of a case where they wouldn’t give refunds.
Really? Working in Southern California a few years ago, refund requests were refused ALL THE TIME. This is why there's a common belief that what you are charged you simply owe them, period.
It may be more progressive now, but let's not be revisionist.
I'm not the type to 'want to speak to the manager' for my self-imposed problems but the more I hear about people coming out ahead the more I think I need to change my ways.
I think you have to think of it a bit more from Amazon's perspective. If you accidentally burn through your entire startup capital and shut down, they lose. If the risk of this sort of thing becomes well-known, then startups will start using other services rather than AWS, and the small fraction that grow big will be less likely to use AWS.
Being an entitled jerk who blames other people for your own negligence is bad, and you shouldn't change that. But openly giving companies the opportunity to be kind (while admitting that it was entirely your fault) potentially helps both them and you.
