time for collection agencies with a
consumer-oriented focus to test
offering commercial collections
because other businesses are expanding
at a greater rate.
“More businesses are borrowing
money, and that leads to more bad
debt,” said Richard Roosen, managing
partner at Roosen, Varchetti & Olivier,
PLLC in Township, Mich.
Here’s how agencies and attorneys
who work in consumer collection—also
called retail collection—can get started
in the commercial debt arena.
Explore and Expand Your Market
Roosen and Cohen agree it’s wise for
a company to first seek to expand
existing client relationships and procure
commercial collection business with
existing consumer collection customers.
While this is a great way to find new
business, keep in mind that the nature
of commercial collection may also
require you to establish completely new
client relationships, and potentially
expand your business territory to more
states or even countries.
Commercial collection clients’
debtors have relatively
large unpaid debts—the
average size turned over
to IACC member
agencies is between
$3,500 and $4,000, and
can even run into the
millions.
But commercial
clients may only turn
over 10 to 15 accounts
for collection annually,
compared to the
hundreds or thousands
of smaller debts turned
over by consumer
clients. Generally speaking, this means
commercial collector businesses must
have more clients than consumer
agencies.
Additionally, any given state or
region has more businesses that require
consumer debt collection than
commercial debt collection. This means
a small- or even medium-sized
consumer debt collection company can
afford to limit its geographic territory
to a state or region, but a commercial
debt collector will likely need to do
business in more places in order to find
enough customers to be successful.
Polishing a pitch and picking up the
telephone can net new customers nearby
or in other time zones, although very
large clients may request an in-person
interview before hiring an agency.
Understand Regulatory and Bonding
Requirements—or Hire Someone Who
Does
Here’s some good news for those
considering commercial collections:
Federal and state regulatory
environments are significantly more
demanding for consumer collections
than commercial collections. In any
state where a company has achieved
regulatory compliance for consumers, it
has already exceeded the hurdles for
commercial collecting.
But as already noted, a consumer
company switching or expanding into
commercial collections may need to
expand into completely new territory.
Federal law exempts commercial
collectors from consumer regulations,
but not every state does, and even some
cities have unique requirements. Some
states or cities only require a business to
register, while others have a licensing
procedure with its own set of hurdles.
As the U.S. economy grows, so does the need for commercial debt collection—making this a
good time for consumer debt collection
companies to consider expanding their
customer base by adding commercial
debt collection services.
Additionally, a holdover in client
business practices stemming from the
Great Recession means any agency or
law firm offering both types of services is
significantly more marketable.
During the economic downturn,
many large companies decreased the
number of staff who worked with
vendors, including debt collectors. The
economy has improved, but companies
haven’t rushed to increase staffing to
former levels.
Dual capabilities are what many of the
biggest clients that loan money, extend
credit or sell goods or services to both
consumers and other businesses desire.
“There’s increasing pressure to do
both,” said Greg Cohen, vice president
of the International Association of
Commercial Collectors and CEO of
Caine & Weiner in Schaumburg, Ill.
The healthy economy creates a safer
By Tom Brenan
operations
Going Commercial
Economic upswing may make this a good time to offer commercial collection services