Businesses channel the creative, entrepreneurial spirit of energetic people into vital products and services, while creating valuable jobs for every nation. During challenging times, it is important for these business owners to understand all facets of credit.

These are the five “C’s” of credit that will determine whether a business receives a commercial loan:

  • Character
  • Capacity
  • Capital
  • Conditions
  • Collateral

The “Character” of a business is the moral integrity of the owner and employees. This could include the reputation of the firm in the community. What is the quality level of products and/or services that are delivered by the company? Companies with strong character receive lower interest rates on their commercial loans.

A company must demonstrate an acceptable “cash flow” or “revenue stream” that will be used to repay the commercial loan. The amount of this cash flow is the “Capacity” of the business to fulfill its debt obligations.

Banks and lending institutions will audit the financial assets (cash, equipment, and property) of the business seeking the commercial loan in order to determine the “Capital” or net worth of the business. Whether or not the commercial loan is used for investment that increases the capital of the business is also a factor in measuring business capital.

“Conditions” refers to both the details (or terms) written into the financial contract, the specific market for the company’s products or services, and the state of the overall economy. The details of the contract - interest rate, repayment schedule, and default penalties - will dictate when a commercial debt collector will be contacted.

For a “secured” commercial loan, the “Collateral” consists of the equipment, machinery, and property that will be surrendered if debt obligations are not fulfilled.

A company that wants a commercial loan must satisfy all five of these criteria in order to be deemed “worthy” of valuable capital. Once companies properly understand all of the facets of credit, they will be more capable of preventing commercial debt collection due to loan default.

A collection agency can become an important partner for any business in helping to recoup debts owed the business from past due clients when all other attempts and options have proved futile. Because the collection agency your business hires is in effect representing you, there are several smart questions to ask a potential agency in order to select one that is reputable as well as effective.

The first question to ask is how long the collection agency has been in business and at their present location. You want an agency that has a good track record and that has been in business long enough to show that they are professionals who get the job done to their clients’ satisfaction.

Another smart question to ask is how many collection agents they have on their staff and how are they trained. Find out if one or more collection agents are assigned to your account. Ask the collection agency if they expect their staff members to be professional and courteous at all times, both attitudes which can only help you in the long run.

Since telephone contact is the main course of action for any collection agency because they are not empowered to file lawsuits, garnish wages or take other legal action against your debtors, ask if the collection agency works nights and weekends to contact debtors. Ask how persistent their phone calls are to the debting party. Collection agencies that have at least some weekend and evening hours make it easier for them to reach the debtor as well as easier for the debtor to visit their offices to settle an account.

Ask how easy the collection agency makes it for the debtor to reach them, either by phone or in person. Where is their office located and do they have several office locations in order to receive payments? Find out if they offer debtors a toll-free number for returning their calls, making it easier for a cash-strapped debtor to call back and discuss the situation rather than avoiding the call because they cannot afford to make a long-distance or toll call to the collection agency.

Ask if the agency is computerized and how often they report the status of your account to you. Ask to see the last report that was done by your state’s regulatory agency reviewing their accounts and internal procedures.

Ask if the agency will provide client referrals from others in your same type of business. Ask what sort of fees they charge you to collect monies owed and if you must sign a contract to retain their services and how long is it binding on both parties.

Ask a prospective collection agency how they ensure that they are following all state and local laws and regulations regarding collection. The best agencies have an attorney either in-house or on retainer to handle legal questions.

Ask how long the collection agency works at trying to obtain your money from past-due accounts and how they determine when to advise you to start legal proceedings against deadbeat clients.

The Fair Debt Collection Practices Act (FDCPA), a federal law enforced by the Federal Trade Commission (FTC), eliminates “abusive and deceptive” collection practices that debt collectors can use when calling and tracking down debtors, including the following:

  • Hours For Calling
    • Collectors can only call consumers between the hours of 8:00 am and 9:00 pm local time.
  • Failure to stop communication upon request
  • Collectors must cease all communications with consumers (other than litigation) after receiving written notice that said consumer wishes no further communication or refuses to pay the alleged debt. Some exceptions do apply.
  • Calling with the intent to annoy, abuse, or harass any person at the called number.
  • Contacting debtors that are being represented by an attorney
  • Using deceit or misrepresentation to collect the debt. This includes misrepresenting the amount of debt owed or the collector informing others that he or she is an attorney or law enforcement officer.
  • Discussing the debt owed to third parties with the exception of the debtor’s attorney or spouse.
  • Using abusive or profane language
  • Publishing a debtor’s name on a “bad debt” list
  • Reporting false information on a consumer’s credit report

When hiring a debt collection firm, it is important to make sure that they will comply with the all regulations in the Fair Debt Collection Practices Act (FDCPA). The debt recovery firm Johnson Morgan & White has highly trained professionals who fully comply with the governing laws.

Many people and businesses have jump on the social media bandwagon to find old friends and to increase exposure on their work and services. Even debt collection agencies are beginning to use social sites such as Facebook and Myspace, but not to find friends, but debtors instead. In the real world, debtors can easily avoid paying their debts by changing their phone numbers, and moving to a new location. However, in the online world, avoiding attention is not so easy. Especially in a place we users are encourage to share their personal information for the entire world to see.

This is not a new use of social media sites. For years we have heard stories of businesses using social sites to do informal backgrounds on potential employees. Now, debt collectors are using it as a tool to find their debtors or their friends.

“It’s public information and if someone has a MySpace or Facebook page and they’ve incurred a debt than there’s absolutely nothing wrong with a debt collector using this information to locate them.” says Jay Gonsalves, president of the Association of Credit and Collection Professionals. While there is nothing wrong about this practice, there are laws that prevent collectors from posting comments or disclosing information to another person online.

For more information on commercial debt collection services, contact Johnson, Morgan & White.

There are quite a few ways to go about collecting debts and some of them are more effective than others. Debt collection, like many other businesses, is changing. The online revolution and the computer age have changed the way debt collecting is done, and there are great agencies who use this technology to their advantage. Forensic corporate collections are the new wave in this industry, and there are quite a few benefits to using this service. The most glaring of these is the fact that the data is collected in a way that it can be used effectively and efficiently in a court of law. What are the other advantages?

Keeping up with a changing consumer dynamic
It’s just a fact of life that things change over time, and that means paper trails are going away. These days, if you want to collect on a debt, then you need to be in control of all sorts of information. People use their computers, their PDAs, their cell phones, and a host of other devices in order to do their business. What a forensic corporate collections agency can do is manage that information and collect data in order to force consumers to make good on their debts. When people continually skip out on their debts, there is a real issue. Getting these people in a court of law comes down to how effectively you can present the information.

Operating within the law
One of the issues with debt collection agencies in general is that many of them don’t have any regard for the law. They do their jobs pretty well, but they break all sorts of personal privacy and consumer protection laws in the process. This can hurt a firm’s chances of collecting a debt, because the means employed by a third party agency can be held against them. Because the primary function of a forensic corporate collections agency is to have information ready for the courts, they operate completely within the law. That should be a given for any agency, but unfortunately it is not with the way today’s debt world operates.

Staying on the cutting edge
When you think about the forensic corporate collections industry, you think about the cutting edge of software and technology. These collections firms employ only the most advanced software in order to aid their data collection efforts. By staying with the cutting edge, it insures that they are not only staying on top of things now, but they are constantly keeping up with what things might be around the corner. Getting all of the information is not easy, which is why these collection firms take their software capability very seriously at this difficult time.

A debt collection agency provides a service that is very useful to several businesses. Since most businesses today will give loyal customers some form of credit, it is vital to the business integrity that the customers pay the dues they owe. Sometimes, customers will simply stop paying their invoices, even if they are called by telephone or even a physical visit. It is because of customers like these that make a debt collection agency a necessary service. Sometimes a professional is needed just to get the smallest amount paid.A debt collection agency will send agents to collect the dues, or will have a professional call center set up to telephone customers. Since the entire purpose of the debt collection agency is to get people to pay their debts, they can get quite good at it.Some Debt Collectors are called percentage agencies. They will charge a percentage of the money collected, but they won’t charge anything if they are unsuccessful. Most percentage agencies charge anything from 33% to 50% of the dues collected.

Flat rate agencies will pay the business a flat rate in exchange for the dues, and then anything they collect from the customers will go straight into their pockets.

Some Commercial Debt Collection Agencies will be a hybrid of the two, and will have a smaller up front flat rate, and a smaller percentage of the paid dues. Then, everything else they collect goes to the business.

The last sort of Debt collection agency will charge businesses by the hour. They are basically a contract call center, and they will let the business keep 100% of the earnings.

Why should anyone use a Commercial Debt Collection Agency?

Many businesses struggle with customers that have trouble paying up. A commercial debt collector is sometime the only thing that will save a business from going under.

Large landlords are notorious for having people unable to pay rent, and a commercial debt collector could save the landlord from bankruptcy.

Large Auto Dealerships have problems with people unable to pay monthly payments. Hiring a commercial debt collection agency could mean the difference between calling the sheriff on the customers, and calling for vacation plans.

Even banks require the occasional use of a debt collection agency. Loan officers find myriads of people unable to pay off loans. Instead of seizing goods and auctioning it off (a practice that often does not even come close to paying off the loan) the bank will hire a debt collection agency to secure the loan funds, and keep the bank running smoothly.

The impact of bad debt on sales and profit for your business can be a serious one. Bad debt can put a stranglehold around a business that will eventually lead to bankruptcy and a destroyed professional reputation.

Debt collection is embarrassing, both financially and personally for a business owner. Whether the unpaid debt is indicative of problems that may be of the business’ own making or the result of an economy in recession, but the result is the same. When a commercial collection agency gets involved it’s already too late to save your good name and may be the first step towards bankruptcy court. Debt collection against your business assets should be avoided at any cost.

Sales suffer when word gets out that your business has been turned over to a commercial collection agency. Confidence in your business is the foundation for your sales and reflects either favorably or unfavorably on how your customers view your products or services. If consumers fear that your business is unstable and untrustworthy, this fear will carry over onto your product line. Consumers may question your ability to honor warranties and whether you will be there to accept returns or make exchanges. Consumer confidence is critical to successful sales and the appearance that your business is in financial trouble may cause your sales begin to plummet.
Sales mean profits and the converse is also true. If your marketing strategy is failing due to commercial debt, your profits will dive as well and further complicate an already unfavorable financial situation.

A commercial debt collector can sometimes handle things discreetly and avoid unnecessary publicity concerning the financial stability of your company. Working closely with a commercial debt collector can minimize the effect that bad debt has on your sales and profits.

Bad debt can also hurt your sales and profit margin by causing you to be turned down for additional credit lines during crucial times. Regular debt is incurred when ordering raw materials or supplies, when opportunities are experienced that require capital outlay, or when normal and expected seasonal slow-downs occur. This cycle of debt and repayment is standard operating procedure and a fundamental requirement for doing business. If bad debt prevents you from borrowing and destroys your credit, your business may not survive the ebb and flow of the business world and you may not be able to borrow the funds needed to survive.

Sales and profits may suffer when your debt prevents your retaining important employees. Hiring the right people is one of the wisest things a business owner can do. They literally make or break the business. Bad commercial debt presents the strong possibility of losing those valued employees because of the lack of your business’ ability to provide insurance, give raises, and award bonuses. If word gets out that your business has been turned over to a commercial debt collector, employees may see the writing on the wall and start looking for other employment. If hiring the right people is important, retaining them is just as important.

Bad debt can and does adversely affect your sales and profit margins. Avoiding bad debt is the preferred course of action but it isn’t always possible. If your debt is being handled by a commercial debt collector, cooperate as fully as possible to reduce the damage to your business. Bad debt can be handled in such a way that your business survives and becomes profitable once again.

A commercial collections agency is a highly specialized debt collection agency which recovers money that corporations or commercial debtors owe. In these lean financial times, debt collection is of utmost importance. Recovering money from the debtor, while still maintaining good relationships between the client and the debtor, is an important balance that a commercial collection agency strives for during the collections process.

A commercial debt collector must understand all aspects of the situation. There could be many different reasons that a certain corporation is not paying its debts, so background checks, timeliness of payments and all other available information must be available to the debt collector. Doing as much research as possible will help provide basic understanding of the situation and at the same time help a commercial debt collector formulate a plan for recovery. Research can be done in a myriad of ways. Obviously the internet is a valuable tool, but a commercial collections agency has many options available, such as skip-tracing and access to non-public databases.

Following the letter of the law is also important to a commercial debt collector. Understanding local regulations and state laws is imperative in this business. From doing the research, making contact with the debtor and recovering the debt, all laws must be followed closely. Commercial debt collections agencies work with lawyers and other industry experts to ensure that the debt is recovered quickly and legally. The training for commercial debt collectors is an ongoing process so that they may stay current with the regulations of the industry, which are ever changing. A commercial collection agency will be able to recognize illegal maneuverings that are sometimes committed by corporate debtors. They will know when it is time for taking cases to court or if using other tactics will bring about better results.

Industry recognition is an important thing to a commercial collections agency. Being a member of the International Association of Commercial Collectors, Inc. (IACC) guarantees that industry standards are being met and that unfair practices are not tolerated. Another important industry watchdog group is the Commercial Law League of America, or CLLA. Again, certain standards must be met in order to become a member of this esteemed group.

Every case is different. But a commercial collection agency can use its extensive knowledge and resources to find debtors and recovery money. Using hard work, intelligence and perseverance, a commercial debt collector can get results that no one else can. Retrieving money while still maintaining client relations is an important facet to commercial debt collection. A commercial debt collector can collect a debt in a timely and legal fashion.

This year our headlines rife with bad news concerning our economy, the issue of coommercial debt collections will probably become a popular topic among business owners. Corporate, or commercial, debt collection agencies utilize methods enhanced by an exceptionally wide scope of technological advances that they combine with traditional detective work to track down debtors and recover what they owe a company. The aforementioned detective work involves investigative technique and talent, often going so far as to understand the psychology behind a delinquent account in order to make a collection. This has been helped considerably with the advent of the Internet, which makes tactics available such as computer surveillance, electronic research, private database access, electronic interception systems and a host of other commercial collection technologies, while complying with all local, state and federal regulations.

Besides settling business debt, commercial collections works closely with the creditor(s) in uncovering fraud while securing their delinquent receivables and bad debt. A company’s investigative and forensic techniques are especially helpful in exposing debtor deception. With identity theft on the rise, corporate debt collection agencies often have to play a very advanced game of cat-and-mouse to get debtors to pay, even employing skip tracer technologies. That said, it is important for an agency to remain professional and respectful of the law, never forgetting their main objective in locating a debtor or debtors and getting them to make good on their debt while maintaining positive relations between them and clients. To this end, reminder letters can may be designed and distributed on the agency’s company letterhead (or their clients’) in regards to outstanding accounts that can be paid discreetly, without telephone or other communications.

Although the bulk of corporate debt is brought on by fraud, identity theft and various other subterfuges, there are those debtors whose accounts have been placed with a corporate debt collection agency due to miscommunication between suppliers and customers, misunderstandings regarding accounts receivable, and other circumstances. Even so, most debtors typically fit into a specific category or type; this categorization allows corporate collection agencies to utilize the latest in proprietary organizational technologies and investigative tactics to locate debtors on a specific case-by-case basis. Once a debtor is located, a personal file can be compiled on the debtor’s financial condition. This technique often allows the agency to formulate the most effective collection method for a particular debtor, and can provide the client with a means to make future credit decisions that will avoid future run-ins with habitual debt offenders. Clients can also request that reports on account activity be made available to corporate credit bureaus.

After all investigative account management techniques have been exhausted, a corporate collections agency may turn to litigation of the debtor to collect an overdue debt. However, a good corporate debt collection agency’s first order is to collect the debt in their possession using the means they have at their disposal. This is generally achieved by employing a dedicated and knowledgeable staff that is familiar with the latest collection technologies their firm has in their arsenal. Once a team of globally tuned and experienced agents is coupled with the latest technological debt collection approaches and communication techniques, they and their firm’s reputation lies in their combined ability to acquire the debt in their possession in full, and present it to the client upon collection through a secure means of remittance.

Not all small businesses succeed, and not all companies take out loans with the best intentions. Even companies who choose to lend their money wisely may find themselves involved in commercial collections. While companies who constantly loan money to other companies tend to employ lawyers who are familiar with the commercial collections process, this is prohibitively expensive for small businesses. This is why businesses which do not have the need or resources to maintain an in-house commercial collections agency should look into forming a business relationship with one.

Commercial collections agencies
take the hard work and hassle off the lender, permitting them to focus on continuing their day-to-day operations. They are also familiar with what legal methods may be used to collect on the debt, and how to work as an intermediary between the two companies to ensure the money is paid off. Commercial collections is, after all, very different from personal debt collection, and so hiring someone familiar with the necessary laws is key.

Commercial collectors start out by contacting and negotiating with the borrowing company through e-mail, phone calls and other means of contact. They know how to apply pressure through the borrower’s credit rating and reputation to ensure they pay up as they are expected to. They will only get more aggressive if necessary, and will move to take the business into court if required, however most companies pay up when they are properly reminded of their responsibilities. Their professional, yet firm nature insures that they apply only as much pressure is needed, and that they do not antagonize the debtor. Gentle but insistent pressure is key, along with patience and a cool demeanor.

Commercial collections is often hard work that requires lots of time, research and negotiation by dedicated staff, and the advantages of information and experience that commercial collection agencies have gives them a decided edge. They know how to push just hard enough to get the money back, and when to take the case to court. Companies who do not specialize in finances and only lend money to companies now and then will find that even the threat of contacting a well-known commercial collections agency may get some deadbeat debtors to pay up, and in any event hiring an agency will permit the lender’s staff to go back to focusing on the more important day-to-day functions of the company.

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