Taking on debt is one of the most common ways to fuel a rapidly growing small business. But that debt can quickly become an anchor weighing down the entire company if growth sputters, and the resulting collections can be even more problematic than the debt in the first place.
If your business regularly offers credit terms on B2B sales, it is essential to ensure clients stay current on their payment plans. Should things go south, you could have a claim on everything from real estate and equipment to inventory and accounts.
Of course, there is also the fact that you’re probably more concerned with running your own business than collecting from a failed one. That’s why many small business owners prefer to hire commercial debt collection agencies to manage collections on their behalf.
What is Commercial Debt Collection?
Commercial debt collection describes the process of hiring a professional collection agency to recover debts that are owed to your business. In most cases, some qualifications and credentials will be required to distinguish that you are working with a reputable collection agent.
The commercial debt collection process typically involves everything from communicating with debtors about the amounts owed and negotiating payment terms to pursuing legal action and obtaining a judgment against a debtor and garnishing their wages.
Reasons Businesses Hire Debt Collectors
Most businesses that hire commercial debt collectors do so to pursue non-payment of invoices and outstanding balances. Having someone else handle this aspect of the business allows the core management team to focus on the areas where the company generates income.
In addition to reducing the administrative burden, commercial debt collectors also provide extensive experience to help get the job done more efficiently and avoid any time-barred issues. They can also be available to work on a contingency basis, so the cost is only a portion of what they collect on your behalf.
Legal Considerations for Business Debts
There is a wealth of information available on the legal side of debt collection. This covers things like the Fair Debt Collection Practices Act and the state and local laws that build on it.
However, it is essential to remember that these laws are specific to consumer debt. In most cases, they do not apply to business debts. This allows commercial collection agents more flexibility in collecting on your behalf, but it is always a fine line between pushing too hard and not pushing hard enough.
Options for Businesses Dealing With Collectors
When a collection agent contacts a business to collect from them, they typically open the door to negotiate a settlement of the outstanding debts. Companies can use this as an opportunity to line up additional finance to bridge that gap to better times, but they also have the option of dissolving the business or filing for bankruptcy protection.
Because the goal of any creditor is to get paid for the product or service provided, it is always a benefit to have an experienced collection agent operating on your team to ensure that you are conducting business with the most likelihood of getting paid.
Contact Direct Recovery today if you would like to discuss how we can help take the administrative burden of delinquent accounts receivable off of your hands.
