Business collection agency

Helene Mueller
eCollect support team

A business collection agency recovers commercial debts, where the debtor is not an individual, but a business company. Such agency collects unsecured business loans, corporate delinquent payments, etc. Generally, the commercial debt recovery is known as B2B or business-to-business collection, where there are two commercial parties- the consumer and the creditor, and they both represent business organisations. A business recovery agency acts in favour of the lender and it can be either separate, private DCA (Debt Collection Agency) or can be a segment of creditor’s finance sections (first-party debt recovery agency). In the first case the business recovery agency is also called “third-party” recovery agency, as it has no connection with the loan contract between the creditor and debtor or a debt recovery. Such DCA’s representatives are known as “mediators”, as the collection agents are negotiators between the original lender and the subject of debt.

Operation areas of a business collection agency

A commercial collection agency can act as national or international DCA. In the first case it is regulated by local laws and acts and in the second the recovery agency has to comply not only with local laws, but also with international and official EU regulations (if the DCA operates within the European Union).

Areas of operation of a corporate collection agency can also be divided into fields of collection of secured and unsecured commercial debts. The first case is not commonly encountered amongst recovery agencies. The reason is that the secured debts are always followed by a collateral, where the creditor has the legal right to confiscate debtor’s collateral subject (either a personal belonging, a car, house, etc.). Logically lenders who chase secured debts don’t usually need the services of a business collection company.

Unsecured debts, on other hand, are not followed by an additional legal guarantee for tangible property or object. A creditor will usually hire a business collection agency, when he has problems with bad debt and delinquent payments owed by another business organisation.

Business collection agency- debt repayment plans

A business collection agency can negotiate with the debtor and offer a convenient debt repayment plans, which are commonly known under different names, e.g. the so-called DMP- Debt Management Plan. Such plan is based on monthly payments and is performed in a way that conforms to debtor’s financial situation. The business recovery agency will discuss and review debtor’s monetary and financial state and will propose a fixed amount to be paid each month by the consumer (debtor) until the full amount is covered and the debt is cleared.

DPMs are convenient for subjects of debt, who do not possess the financial funds to clear the debt at once. This is a plus for both creditor and debtor: the lender will receive further security and guarantee for payment and the debtor won’t be contacted by a debt collection agency anymore, unless in case of new late payments. A corporate collection agency can offer debt settlement plan, when performing personal visits to debtor’s offices/building.

The IVAs (Individual Voluntary Arrangements) and CVAs (Company Voluntary Arrangements) are other varieties of a debt repayment plan. The Company Voluntary Arrangement applies for commercial debt recovery. A recovery agency usually offers such agreement to an insolvent company, which also owes a certain amount to another business organisation (the creditor). This model of composition allows the corporation in debt to transfer a percentage of the amount based on monthly payment, until the debt is settled in full.

Other recovery methods of a business collection agency

Apart from the debt repayment plans, a business collection agency also utilises other recovery methods for debt collection:

  • Corporate tracing. These services represent a collection method consisting of tracking the company in debt. In business debt collection this is often not necessary or not complicated to achieve, as companies in debt are usually easy to find;
  • Phone calls, text and fax messages, voice mails, etc., addressed to the debtor (the so-called “multichannel communication”);
  • Written friendly reminders, informing the organisation in debt about its delinquent payments, which await payment;
  • Personal visits performed by debt collection solicitors. Such actions aim either to end up with a negotiation plan for settling the debt, OR to seize the company in debt’s corporate belongings, equipment, etc.;
  • Official letters of demand and final letters before action sent by post. Such letters can be sent either by a standard debt collector or by a debt recovery solicitor, both representatives of a business recovery agency. In the first case the agent cannot form the document as legal. In the second case, such official letters are legal papers, as they are written by lawful attorneys;
  • Court actions proceedings, if necessary: small claims court, lien filing, etc. Court process may have serious consequences to the organisation in debt. If the company still denies to pay the debt amount, court can warrant seizure of company’s property and even of the whole building (if it is debtor’s property), bankruptcy, financial accounts’ garnishment;
  • A business collection agency can offer long-term monitoring of past debtors’ profiles and also scoring future business partners, which aims to predict appearance of possible bad debts and estimates creditor’s potential partners. Creditors can only benefit from this service, as it can drastically decrease delinquent and late payments’ advent.

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