It can be valuable and profitable to learn how to start a debt collection business. With consumer debt mounting and therefore a greater need now than ever for debt collectors, now is a great time to enter the field and begin the path to financial independence. Essentially, all a debt collector does is help companies collect delinquent debts over the phone and through the mail. This means low overhead and start-up costs, making learning how to start a debt collection business a great first step toward self-employment and the freedom that comes with it.
Estimated Startup Costs and Pricing Guidelines:
Low overhead and start-up costs make a debt collection business an ideal option for people looking to start their own business. With a personal computer, cell phone, fax machine, and other home office essentials like a printer, a person has almost all of the essential equipment for less than $1500 if you’re looking for bargains. But part of your startup costs should include some allowance to pay online research companies to help you track down debtors.
While prices vary, a good rule of thumb is that learning how to start a debt collection agency will typically earn you 20-30% of what you collect on behalf of business clients. Of course, the debt is classified and if you start trying to collect older debts, there is a possibility that the commission could go up to 50% or even 60%. Of course, the fees are higher because the chances of collecting these older debts are lower. In total, the price generally depends on the probability of collecting the debt and is generally based on the age of the debt.
Recommended experience, skills and training:
It is certainly a mistake to think about learning how to start a debt collection agency if you have no experience in debt collection. The industry demands a lot of patience, empathy, and a pretty tough skin to stand a decent chance of success. If you haven’t experienced the demands and stress involved in debt collection, you can at least consult with a few people in the industry before considering a business in this field.
Marketing tip:
Since other businesses will be your potential customers, you’ll want to create and maintain a website that looks as professional as possible. If your budget allows, you may want to hire a website builder and freelance writer to help you create the best possible website and achieve higher search engine rankings. You’ll also want a listing in the yellow pages and it may be a good idea to join local networking groups to help spread the word about your business.
Sources of funding:
Being a home based business in most cases (at least initially), financing options are limited and it will be difficult to get a conventional business loan from a bank. However, with good credit and a well thought out business plan, it is possible to receive a business loan from your local bank. Grants from local, state, and federal governments are available and can actually be a great source of funding. If this is not an option for you, you may need to learn how to start a debt collection agency with your savings or the generosity of friends and family.
Income Potential:
Earning potential for the first full year of operations can range from five to six figures. Depending on the type of debts you are trying to collect and the fees you can negotiate, debt collection can actually be a very profitable business. If you want to know more about starting a debt collection business, a good book to refer to is “Starting a Home Based Collection Agency” by Robert Bill.