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Nuances of Business to Business Debt Collection

Posted on in Finance Company Collections

Nuances of Business to Business Debt CollectionBusinesses are some of the most lucrative clients for finance companies because they need loans to purchase goods or equipment. A well-timed loan can help a business eventually turn a profit and lead to long-term relationships with financiers that benefit both sides. However, businesses are also liable to default on their debts, which may be substantial depending on how much they needed to purchase. Finance companies must use their best judgment in determining how aggressive they should be with business clients.

Personal Communication

Hiring a debt collection agency or taking a commercial debtor to court may sour the relationship between a finance company and a business. Before taking those steps, the creditor can try to settle the debt on a more personal level by:

  • Sending a letter to inform the business that it is late in making payments;
  • Making a personal phone call to the business owner; and
  • Visiting the business owner to discuss the matter.

The business may be temporarily having financial trouble that is preventing it from making the most recent payment. The creditor can choose to work with the business, including offering to modify the loan.

Collection Agencies

If a business debtor is being uncooperative, the finance company can hire a debt collection agency that specializes in commercial debt. Unlike with consumer debt, the Fair Debt Collection Practices Act does not regulate commercial debt collection. Instead, commercial debt collectors are regulated on a state level. This is consequential in Illinois, which recently changed its debt collection law so that consumer and commercial debt collectors are regulated the same. In other states without such laws, commercial debt collectors may be allowed to use collection practices that would be illegal to use against consumer debtors.

Litigation

Filing a lawsuit against a business debtor is often seen as a last resort when the business owner does not respond to personal communication or debt collection agencies. The court will order the business owner to appear, and the creditor must prove the existence of an outstanding debt by presenting:

  • The loan contract;
  • Account statements showing a lack of payments;
  • Documentation of efforts to contact the debtor; and
  • The debtor’s responses.

A favorable ruling allows the finance company to begin legal collection efforts against the business. This may require investigating the business’s available assets and using judgment enforcement tools to seize those assets.

Commercial Debt

Deciding when to use a commercial debt collection agency or litigation may depend on your relationship with the client. Though you may successfully collect the debt using aggressive means, you also risk losing the business as a client. A Chicago debt collection attorney with Walinski & Associates, P.C., can advise you of your options with commercial debts. Schedule a consultation by calling 312-704-0771.

Source:

http://smallbusiness.chron.com/collect-business-loan-3713.html

Illinois Creditors Bar Association Chicago Bar Association Illinois State Bar Association
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