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Methods for Debt Collection

For many business owners, taking on debt is part of the cost of doing business, especially in the beginning. For example, businesses may find themselves putting business expenses on credit cards, borrowing money to purchase equipment and other assets, and / or using lines of credit to make improvements or renovate the business' physical space.

If an account or loan is past due, and your business receives a notice from a commercial debt collector, it may be tempting to panic. After all, the notice could contain threatening or intimidating language, and it may seem like you have no option but to pay the entire debt at once. For many business owners, however, paying a large loan at once is not possible.

Commercial debt agencies typically wait anywhere from 90 to 120 days for the business to pay a past due account or loan. At that point, the business creditor will either sue the business for its unpaid debts, assign the debt to another party to collect it, or sell the debt to a commercial debt collector.

- Lawsuit. Bringing a lawsuit is a costly and time-consuming endeavor for the business creditor; depending on the amount owed and the likelihood of collecting, a business might choose to sue right away.

- Assignment. Assigning the debt means another party can collect the debt on the business' behalf, or the other party can simply collect the loan and keep the extra money.

- Sale. Selling the debt means a commercial debt collector will pay the business creditor a fraction of what the collector thinks it can recover. Sometimes this is 10 percent or less. The business owner will receive an immediate payment from the collector and the collector has an incentive to collect from the business more than the amount paid to the business owner.

The business creditor seeks full or near-full repayment of the loan, and because none of the three options above guarantees repayment, the business creditor may be interested in settling for less than the amount owed.

Commercial debt collectors operate under fewer state and federal laws than do consumer debt collectors. When collecting a business debt, commercial debt collectors are not required to follow laws that prohibit harassment of consumer borrowers. However, this does not mean a commercial debt collector will call the business repeatedly or engage in other aggressive tactics. Settlement remains an option for commercial debt collectors.

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To discuss collecting an outstanding debt due to your business, contact experienced commercial collections attorney Ronald P. Slates today.

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