Brian Summerfelt, President & CEO at MetCredit, MetCredit USA and Affinity Credit Solutions.
When you think of the words “collection agency,” what comes to mind?
For many, the term conjures thoughts of receiving a collection notice by mail or phone —after they’ve neglected to make a student loan or cellular payment. That is because the majority of debt collections are placed (and received) on the consumer level, on the basis of the numbers alone. There are exponentially more individuals than there are businesses.
Most of us wind up in default of one thing or another over the course of our lives. I did —and ironically my unpaid student loan being sent to collections was what kicked off my career in the debt collection industry. Something else you may not know is that a wide array of business types benefit from partnering with a collection agency. Here are a few specific examples.
Consumer Debt Collection
As I mentioned, consumer debt is a very large realm, because it involves millions of individuals owing debts. Consumer debt, also known as B2C debt, can be assigned to multiple collection agencies by large organizations with numerous customers or one-by-one in the case of smaller businesses. Any time a private individual owes money that is past the agreed-upon due date, it is considered consumer debt. Businesses that frequently rely on consumer debt collection services include:
• Banks and credit unions, as well as credit card providers.
• Retail stores.
• Personal services and spas.
• Hospitals, clinics and dentists.
• Gyms and fitness clubs.
• Veterinary clinics.
• Landlords and property managers.
Commercial Debt Collection
When one business fails to pay its debt to another, it becomes a commercial debt recovery matter. Also known as B2B debt collection, commercial accounts can also be sent to a collection agency by a range of business types — essentially any who grant credit and can provide evidence of a debt. The size of commercial debt can range from a few hundred dollars to millions. Business types that can use a collection agency for B2B debt include:
• Accounting firms.
• Construction companies and contractors.
• Architects and engineers.
• Equipment rental businesses.
• Marketing agencies.
• Shipping and transport companies.
More Surprising Cases
There are also some organizational models you might not think of for which a collection agency can be a very good fit in rounding up overdue receivables. Some of the more surprising clients I’ve collected debt for include entities such as the government (all levels), law firms, court-appointed receivers and charities. I’ve also collected debt for small businesses and owners like morticians and funeral homes, wedding planners, maintenance services (such as landscaping and repair work) and e-commerce shops.
As you can see, all kinds of entities have a need to collect debt. If your business grants credit and can prove money is owed to it, chances are good a collection agency can get you paid if you in fact have customers in debt. The vast majority of the time, because there’s no need for a court order and the associated delays, the turnaround time can be very quick.
Business Debt Collection Challenges And Considerations
While working with a collection agency can be suitable for a wide range of business types, it would be misleading to suggest it’s the right solution for all debt issues.
In order for a debt to be collected under any circumstances, it should be properly documented and relatively current. You will need to provide contracts, invoices and other documentation to prove that the money is genuinely owed to your business. Every U.S. state has its own statute of limitations on debt, which ranges from three to 15 years depending on the type of agreement with the customer.
For larger debt (generally over $10,000) it can make more sense to speak to a lawyer, as many such cases end up in litigation and the fees can be justified by the amount at risk.
If you’re unsure about a debt affecting your business, I might recommend doing some due diligence by reaching out to a few reputable collection agencies. As debt recovery experts, they will be able to tell you quickly if it looks like a fit, if you’re facing an uphill battle, or if another avenue might deliver better results.