How to Start a Debt Recovery Business
Debt recovery businesses are a growing industry. The field of debt collection is complicated and challenging. However, it can still be profitable if handled well. The debt recovery business requires certain personality traits. Empathy is helpful for dealing with people who are honestly struggling to make ends meet. A high degree of confidence is also helpful for those who are reluctant to pay. Good investigative skills and persistence will find people who are hiding from their responsibility. Debt collection is a challenge but a worthwhile business venture.
Obtain start-up equipment. Although debt collection businesses can be run from home, an office is a more professional business location. You will need office equipment regardless. A telephone and fax machine are essential. The telephone ideally should have more than one line so clients can be put through if the other is busy. A computer with a printer is also a necessity. You will also need a website and a car for a debt collection business.
Create a business plan. The business plan should cover the first three years of the operation. The business plan will help estimate the costs involved in the venture. It is also essential if outside financing is needed.
Learn your state and local licencing requirements. Each state has different rules regarding business licences. Contact your state's secretary of state office to find out if your debt recovery business needs licenses and how to obtaining them.
Read up on consumer rights. Copies of the Fair Debt Collection Practices Act, the Truth in Lending Laws, the Credit Card Accountability and Disclosure Act and the Fair Credit Reporting Act are all available online. Contact your state's secretary of state and state's attorney offices for information on local consumer and business law.
Hire staff. You will need some staff even if your business is small. You'll need an administrative staff member with good organisation, communication, filing and clerical skills to handle calls and correspondence as it comes in. You'll also want to hire someone as a collector. No formal qualifications are required, but at a minimum a collector should communicate well, behave in a professional manner and be firm when necessary.
Search out clients. Small businesses that work on a billing system are good potential clients. Small businesses often have difficulty recovering debts because they have small staffs, so they outsource to collection agencies. Large businesses are still a possibility, but many already have established credit control systems and in-house collection departments.
- Office space
- Cell phone
- Phone with multiple lines