Approximately 77 million Americans are in some form of debt. Most debt collection agencies and law firms focus a lot of their time, energy and resources on collecting these retail consumer debts. However, businesses and corporations can also default on loans and mortgages and purchase inventory they cannot afford.
For collectors, compelling a commercial debt can be significantly different than collecting an individual consumer debt (although many firms use the same processes). Depending on the corporate structure, using your tried and true policies and procedures may be the best course of action for continuity for your employees and records.
An important step in collecting a corporate debt is finding the right person to contact. For a small business, it’s usually the owner, but for a corporation or chain, it is typically someone in the accounts payable department. When a collector is researching the appropriate contact, he or she might find that there are actually two debtors: the named corporation and a personal guarantor, an individual who also signed their name to the purchase or contract.
Corporate debts are often easier to collect, and corporations are often more likely to pay than individual consumers. There are fewer restrictions on the collector and often, more money is involved.
However, depending on the size of the debt and the stability of the company, corporate debts also have a shorter life. While a personal debt can be pursued until the debtor passes away (and even then, certain debts are inherited by relatives) or the statute of limitations expires, if a company goes out of business, files bankruptcy or becomes defunct, time expires for the collector.
Over the course of this three part series, we will look at the unique differences and practices involved in the collection commercial debts. Be sure to check in next week for more information!