Businesses borrow money for various reasons, such as purchasing inventory for the company, making payments, or numerous other reasons. When they fail to pay the money back, this is counted as an unpaid debt, and when the lender feels that the cash flow is being affected, they have the only solution of seeking debt recovery services. These agencies ensure that the outstanding debt is recovered and the relationship between the debtor and the lender is not affected. In this article, we take a deep dive into commercial debt and understand how debt collection and recovery agencies help in the process.

WHAT IS COMMERCIAL DEBT?

Commercial debt is any debt that an organisation has to clear in lieu of the money it took to fund its operations. It can also be a debt for expansion or just to make ends meet. Different strategies are used to handle commercial debt, like negotiating with creditors or agreeing to a specific payment plan. When these solutions don't resolve the problem, the lender turns to a commercial debt recovery agency.

HOW DO THESE AGENCIES WORK?

A commercial debt recovery agency offers commercial and business debt recovery services using its specialisation in collecting overdue debts. These agencies mostly work with creditors and help companies to manage their obligations. For this, they use different strategies and techniques, including calling customers, sending informal and then formal letters and emails, filing lawsuits and garnishing wages. Against all their services, they charge a percentage of the amount they collect. The rules are very simple for businesses to understand the modus operandi of these agencies.

RULES OF THE GAME

Agencies run by the government, like ACCC and ASIC, regulate the debt recovery and collection industry and monitor the actions of third-party business debt recovery services. These agencies have standards and laws that every agency has to comply with while dealing with a debtor. For example, they have to give the consumer all the information regarding inaccuracies or issues arising related to the debt. These agencies cannot harass the debtor or make false statements about the debt.

They are responsible for providing debtors with all specific information related to the debt, previous payments, or the contract. A debt recovery professional has no right to seize assets from the debtor unless the agency or the lender has won a lawsuit in a court of law.

They must not physically harm or threaten to harm the debtor to extract the payment. These professionals cannot contact any individual while they are at work or contact anyone at their workplace.

The first thing that a lender has to do is find a reputed recovery agency to make a proper recovery in a timely fashion. This involves researching deeply about various shortlisted companies and selecting some of them until finally choosing the last one that is capable of handling your debt and delivering anticipated results.

WHAT DOES A DEBT COLLECTION AGENCY DO?

The role of a business debt recovery agency is to collect the outstanding debt on their client's behalf. For this, they can sue you for the debt they owe. If the debt collection agency wins the lawsuit, they can follow the court's orders. Here are some helpful tips for finding the best business debt recovery agency.

Debt recovery agencies have the expertise and specialisation needed to recover all debts that have passed the due date. You have to sit back and watch them do their job.

CARRY OUT YOUR RESEARCH

Debt recovery agencies specialise in different areas, sectors or industries like commercial loans, medical loans, auto loans, and so on. Before making any selection, you must check your requirements and whether the agency shortlisted is licenced to operate in different states. You must choose the one that matches your portfolio and has the specialisation needed to operate in your industry.

VERIFY THE LEGITIMACY

Remember to research the experience of the shortlisted agencies if you want a guarantee of favourable results. The shortlisted agencies must have been in business for at least 5 years, and your focus should only be on the companies insured and accredited by the relevant government agencies and laws.

COMPLIANCE WITH THE LAWS

The shortlisted debt recovery agency must always choose best practices related to debt recovery and follow all the state and federal regulations. They should take the laws and regulations of ASIC and ACCC very seriously and maintain the standard as expected by the government. This will help you uphold your brand image and minimise your liability exposure.

Apart from this, they should also be equipped with the latest technology and strategies to operate in your industry and generate favourable results related to debt recovery. You should ensure that they have incorporated an Omni-channel platform and that all modern communication solutions are available for instant contact. Traditional communication solutions like text and emails are not effective anymore, and the company must utilise data analytics and machine learning tools for better results quickly.

DO THEY PROVIDE SKIP-TRACING SERVICES OR NOT?

In some cases, the debtor is missing from the address that they provided to the lender. In this situation, the skip tracing method becomes useful, and you must ensure that a business debt recovery agency offers these services to track missing defaulters. For this, they must use all the tools, including social media platforms like Instagram, LinkedIn, Facebook, etc. They provide a whole range of information that one can need to locate any missing debtors.

UNDERSTAND THEIR FEE STRUCTURE

This is important to understand before hiring any debt recovery agency in NSW, as the fees vary greatly. Experts recommend selecting and shortlisting companies that work on a commission model, as, in that case, they will charge you some percentage of the amount collected. This way, you will not face the burden of making a payment if the target is not achieved. Before shortlisting any agency, you should cross-check all the details and determine the fee structure. Remember, the lowest cost does not always mean the best results. So it's better to select a company that provides its services at a very low price, but they don't compromise the quality of the services.

UNDERSTAND THE REPORTING PROCESS

One very common mistake that lenders commit is they don't pay more attention towards understanding the reporting process of the shortlisted debt recovery agency. This is something to avoid completely and reporting should be a significant part of the project. You should check with the shortlisted agencies to see whether they will provide real-time reporting and whether they will maintain complete transparency throughout the entire process. This will not be time-consuming, and your business activities will not get disturbed. This way, you will select a company that promises to maximise the amount of the debt while maintaining complete transparency and a better relationship with the lenders.

Business Debt Recovery and the Role of Debt Recovery Professionals