One of the challenges for many business owners is ensuring accounts receivable are current. If your clients or suppliers' accounts are past due, you may consider calling a firm to assist with commercial collections. Indeed, timing is often critical in debt collection matters. Some business creditors worry that by the time they collect, the borrower will have liquidated any assets that can be used to repay the loan. While legal procedures can slow down or stop a borrower from destroying assets, the most important part of reacting to a borrower's refusal to pay a loan is to seek immediate and experienced legal counsel.
Commercial debt collection is not subject to the same restrictions that consumer debt collections are subjected to. That is, the federal Fair Debt Collection Practices Act, which forbids harassment, abuse and other intimidating or deceiving tactics, does not apply to commercial debt collectors. Despite the leeway accorded to commercial debt collectors, typical commercial debt collection success rates are often still quite low. If you sell a debt to a collection agency, the chances that you will collect most of your accounts or loan are generally not high. Some savvy business owners decide that instead of selling a debt to a collection agency for pennies on the dollar, they will negotiate, or hire an attorney to help negotiate, a settlement amount that is less than the account owed or loan. An attorney can also help create a re-payment plan with the business borrower.
To choose a debt collection agency, you can search for an agency that is a certified member of the Commercial Collection Agency Association. Members must have been in business for five years; must purchase a surety bond of $300,000 to protect creditors; must have a practice that is at least 80% commercial bonds; must promise to follow certain ethical guidelines and other statutes, and must maintain a separate trust account for creditors' money. Some states license commercial debt collection agencies. California does not have such licensing requirements, which means that anyone over age 18 can become a commercial debt collector.
Your best bet is to hire an experienced commercial collections attorney to ensure that the job gets done.