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Small Business Debt Recovery is a fundamental function in every business. Having a clear and intentional policy when considering how to collect a debt owed to a business is necessary to be successful. When the time to pay back a loan or an invoice elapses, creditors must take the available steps to recover their money. The process is what is referred to as debt recovery
Small Business Debts
Understanding that there are different types of debts is important as the manner in which they are addressed will differ. As the remedies available to a creditor vary vastly it is necessary to have a gameplan in place to address each type.
Revolving and Non-Revolving
Usually, loans and credit lines have a certain amount of payable monthly. However, there are some loans that don’t have that payable amount monthly. This type of debt is considered revolving debt. When fixed payment is applicable in a loan, the debt now is considered a non-revolving debt. The revolving debt has possibilities to grow while non-revolving does not because it is fixed. Non-revolving debts are those like auto and home loans where the terms are fixed. Business lines of credit and credit cards are revolving debts as their payment terms are dependent upon utilization.
Secured and Unsecured
When securing a loan, debtors can be asked to provide collateral. When there is collateral that is tied to the debt it becomes a secured loan or debt. When the debtor refuses to pay, or the deadline elapses, the creditor can move to repossess or liquidate the collateral to collect on the debt. The unsecured loan has no collateral so the creditor will not have anything to fall back on in the event of a default.
Ways to Collect a Small Business Debt
When a company is faced with a past due account there are many tactics to use to collect the payment. These tactics can be used in conjunction with each other to try to secure payment.
Invoice as Usual
The first step of starting the debt recovery process is sending the debtor an invoice as usual. Maybe you have been sending them all along but continuing to invoice is important. An invoice acts as evidence that you have been reaching out to the debtor to secure payment. The client might act silently to the invoice. Taking an extra step by sending some emails and making some phone calls to communicate with the client can also go a long way however, don’t be rude or harsh to the client. That cannot help recover your money back. Use polite words to remind the client of the importance of paying you back.
Credit Hold
The client might have open debt but still, be trying to obtain additional services and products. If the client takes longer to pay you back, you can decide to cut them off from additional purchases. This is done to remind the client time has come to pay you. This will show your client that the matter is escalating and that payment is now necessary to continue the business.
Last Warning
When first processing the debt with the client, you first agreed on terms concerning payment of the debt. Now that the payment date has elapsed, and the payment has not been made the next step is coming up with the last notice for payment. If this final deadline elapses and no payment is made, the creditor can now seek outside action against the debtor.
Contact a Third Party
If your customer has not responded to the final notice the best way to deal with the client is by using a third party collection agency. If you continue to communicate with your client after a final notice is sent you may be signaling that you are not prepared to force the issue. Your business risks becoming the proverbial boy who cried wolf as your threats go without action. Using a third party debt collection agency shows your customer that you are serious about receiving payment. In addition to this most collection agencies will be skilled and experienced in handling these situations allowing you to focus on building your business.
Get Your Money. Call Now 321-710-3530
We are experts at collecting debt previously deemed “un-collectable debt”.
GET A FREE QUOTE