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Debt Collection Tips for Small Business Owners

Posted on in Debt Collection

Debt Collection Tips for Small Business OwnersAs a small business owner, you likely do not think of yourself as a creditor. However, that is the role you have taken when you allow customers to repay you over time for products or services provided. Collecting debt sometimes requires being more forceful with debtors than you are comfortable with. Because you deal with your customers personally, it may be awkward to hold them accountable for unpaid debts. You can minimize confrontation during debt collection by acting quickly and being thorough.

Crafting an Agreement

You should always finalize any borrowing or repayment plan with a customer by having them sign a written contract. Verbal agreements are difficult to enforce if your customer does not pay you back. A contract should explain:

  • The timeline for making payments;
  • Any interest accrued as part of the repayment plan;
  • Penalties for being late on payments; and
  • Consequences if the debtor defaults on the loan.


You should contact your customer from the first time he or she is late with a payment. A letter or brief phone call often suffices. You want to figure out the reason for the missed payment, such as:

  • Financial difficulties that prevented the payment;
  • A plan to sporadically make payments as part of juggling multiple debts; or
  • A refusal to repay the debt.

If the customer intends to pay off the debt but was unable, you can discuss options for modifying the loan agreement. If the customer has no intention of repaying you, you may need to use aggressive recollection efforts, such as litigation. You want to avoid being overly aggressive with a customer who wants to cooperate or overly lenient with a customer who will not take gentle reminders seriously.

Knowing How Far to Go

There are several debt collection tools that you can use against debtors, including:

  • Hiring a debt collection agency;
  • Using a small claims court; or
  • Filing a lawsuit.

However, each method includes expenses on your part. In some cases, continuing to pursue the debt is not worth the cost to you. You should consider the size of the loan and the likelihood of successful collection before determining whether to cut your losses by not pursuing the debt or settling for less than the value of the loan.

Legal Guidance

There are several legal requirements for debt collection that you should not be expected to know as a small business owner. A Chicago debt collection attorney at Walinski & Associates, P.C., can help you understand your rights as a creditor. Schedule a consultation by calling 312-704-0771.


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