Commercial debt collection refers to debts that one business owes to another. This is a debt for goods or services that the purchaser never pays the supplier. It’s the responsibility of every business owner to focus on receiving prompt payment. It’s all about avoiding a follow-up from the debtor. Business owners have a choice about how to collect on commercial debt as there are no perfect or low-cost methods to collect on overdue commercial collection firms.
Businesses provide debtors a certain amount of time to pay for goods or services. Now, this may range anywhere between 30 to 120 days. Once that time lapses, the commercial collection firm has a few options,
- Sue the business for unpaid debts
- Assign the debt to another party to collect it
- Sell the debt to a commercial collection agency
Creditors might open to the settlement because they determine it is better to receive partial payment than nothing. The first approach here is to call the business owner or department head. The collector will try its best to determine the person with authority to pay or settle the outstanding debt.
You may think that selling a loan to a commercial debt collection agency means avoiding legal action; this is not necessarily true. In some cases, a collector might escalate an issue to litigation. The collector usually has a firm or several firms to recommend for this process.
Suing over unpaid debt
Businesses would typically initiate a suit for unpaid debt by bringing claims for breach of contract, negligence, unfair business practices, and potentially other claims. A lawsuit can be an efficient way where the amount owed is significant.
Different legal tools can be used to attach or project a debtor’s remaining assets, such as personal and real property. The commercial debt collection agency can be effective in helping the debtor to pay.
Assigning unpaid debt
Some business owners may choose to assign their service to another party. This may be done as part of the business deal. For example, as a part of the sale, the buyer could receive an assignment of the debts owed by the tenants.
The buyer can collect on the debt and would retain the benefits of the collection. However, by purchasing this encumbered property, the buyer equally risks not being able to collect on the debt.
Selling unpaid debt to a collector
Some business owners may sell their loans to a commercial debt collection. Here, the collector pays the business a small percentage of the loan’s value, based on what the collector thinks. The benefit to the business owner is that they’ll receive some small return on loan.
States also regulate commercial debt collection. Many people recommend choosing only collectors that are members of the Commercial Collection Agency Association. To join the CCCA, members must have been in business. Unlike consumer debt collectors, debt collection is not just subjected to the Fair Debt Collection Practices Act (FDCPA).
The FDCPA ensures illegal debt collection techniques such as harassment, abuse, and other intimidating or deceiving tactics are not run. Besides, the members of the CCCA must agree to follow specific ethical guidelines and keep creditors’ money which they collect, in a separate client trust account.
Commercial debt collection helps benefit businesses of all sizes. Featuring many different plans, some firms will work based on a flat fee while others will work on commission. Now, this totally depends on the needs. First, you must speak to collection services about the programs they offer.
Collection firms will handle the best way for businesses to collect unpaid debts. However, when tired of struggling with collections, it’s best to consider turning to professionals.