Posted On: March 25, 2021
Do you run a profitable business driven with low overhead and human capital? Does it seem like everything is going well until the moment you realize some of your outstanding balances are past due?
Even if you tried to send customer debt collection requests, they have fallen on black days. After speaking with colleagues, you were told about the possibility of commercial debt collection agencies taking over. This is known as business-to-business debt, these firms specialize in debt recovery owed by businesses.
This type of debt collection can be hard to understand at first. In this article, we will cover everything you need to know about commercial debt collection so that you can decide if you would like to make use of it.
Whenever you’re ready to learn more about this opportunity, keep reading.
It’s been noted that there are trillions of dollars in business debt, as per statistics from the Federal Reserve. That’s a lot of money, and a lot of goes unpaid.
This is where the commercial collection agency enters.
These types of agencies are never a small business trying to collect. They are third-party contractors to your business. They only get paid when the debt has been collected.
However, a commercial collection agency is unlike a consumer collection agency. The end-target is different.
A commercial organization will collect from other business that has failed to pay their balances. Whereas, a consumer organization pursues the individual debt owed to a business.
While commercial debt collectors have a very high likelihood of succeeding in their collection, they often charge substantial stacks of money from the collected sum. It’s not uncommon to see 50% stakes in this kind of collection task.
You might be wondering which restrictions apply to commercial collection firms and agents. Well, consumer collection strategies are seriously regulated under the Fair Debt Collection Practices Act, which serves as a standard for removing abuse and shady practices in the collector’s world.
However, the FDCPA does not relate to commercial debt collection. This means that commercial debt collectors might be able to use practices in their collection that are otherwise excluded and restricted with the FDCPA.
Keep in mind, this does not mean that B2B collection is unregulated. There are rules in place but they arise from state regulation and law. Some states require these collectors to be bonded and licensed when performing their work activities in the state.
In essence, this means the agency must substantiate financial disclosures, submit applications, pay their licensing fees, and provide proof of bonding.
Also, the Commercial Collection Agency Association certifies members after they pass through a very intricate application process. While this association is not under the wing of the government and it does not have governing authority over non-members, it still has a great reputation in the industry.
Not to mention, registered members under this organization are more likely to be reputable. As well as authentic, and transparent with their process.
It’s common to think that debts dissipate over several years. This comes from the understanding that personal creditor problems disappear from reports after seven years. However, a statute of limitations does not exist for debt.
Commercial debt collectors can try to collect balances until the debt is paid or the company is no longer operational. In Texas, there is a statute of limitations on personal debts. Thus, debt collectors cannot sue for a balance after 4 years.
However, even though this rule does apply to sole proprietors who have a business/personal debt. This rule does not apply to corporations, LLPs, or LLCs.
Hence, hiring a commercial debt collection agency can be a great way to add pressure. Especially to stubborn businesses.
Many businesses make the mistake of hiring a consumer collection agency for their business needs. B2B debt involves large balances and many debtor loopholes.
Hiring a B2B debt collection agency will ensure that your debtors don’t use loopholes to avoid paying. And for good reason, these loopholes can put a large dent in your operational functionality.
A business can expect several things when a debt is sold to a commercial collection agency. First, if a debt has a personal guarantee behind it, the creditor can place the debt as “charged off” with reporting bureaus. Creditors that work with business credit can also do this.
After this, the debt collectors will initiate communication with the debtor via phone calls or formal demand letters. Typically, these contact methods escalate. They either indicate additional action or become frequent.
In other circumstances, the commercial debt collection agency will work with the credit to file lawsuits against the debtor. This can lead to bank account garnishment, which is a great way to get your business its money back over time.
Now that you know what commercial debt agencies do, as well as why you should hire one. You can finally come to decide if you would like to contract one for your own needs.
In any case, if it gets to the point that you need a commercial debt collection agency, it’s probably been a while since your balances have been paid. If that’s the case, don’t put it off any longer.
Get in touch with us now and we will happily accommodate your pressing needs.