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It can be both worthwhile and
profitable to learn How to Start a Debt Collection
Business. With growing consumer debt and therefore a
greater need now than ever for debt collectors, this is a
great time to break into the field and start on the road
to financial independence. Essentially, all a debt
collector does is help businesses collect delinquent debts
through the telephone and mail. This means low overhead
and start up costs making learning how to start a debt
collection business a great first step towards self
employment and the freedom that comes with it.
Estimated start up costs
and pricing guidelines:
The low overhead and start up costs make a debt collection
business an ideal choice for people looking to start their
own business. With a personal computer, cell phone, fax
machine, and other home office essentials such as a
printer, a person has just about all of the essential
equipment for less than $1500 if they shop around for
bargains. But part of the start up costs should include
some allotment to pay online investigation companies to
help you track debtors.
While prices vary, a good
rule of thumb is that learning how to start a debt
collection agency will generally net you 20-30% of what
you collect on the behalf of business clients. Of course
debt is classified and if you start out trying to collect
older debts, there is the chance that the commission can
go as high as 50% or even 60%. Of course the commissions
are higher because the chances of collecting these older
debts is less. All told, pricing generally depends on the
likelihood of collecting the debt and that is generally
based upon the age of the debt.
Recommended experience,
skills, and training:
Without question, it is a mistake to think about learning
how to start a debt collection agency if you do not have
any debt collection experience. The industry demands a lot
of patience, empathy, and a fairly thick skin in order to
have a decent chance for success. If you have not
experienced the demands and stress involved in debt
collection, then you may at least want to consult with
some people in the industry before thinking about a
business in this field.
Marketing tips:
As other businesses will be your potential clients, you
are going to want to create and maintain a website that
looks as professional as possible. Budget permitting, you
may want to hire a website creator and a freelance writer
to help you create the best website possible and achieve
higher search engine rankings. You will also want a
listing in the Yellow Pages and it may be a good idea to
join local networking groups to help you in spreading the
word about your company.
Financing sources:
Being a home based business in most cases (at least in the
beginning), financing options are limited and a
conventional business loan from a bank will be difficult
to obtain. However, with good credit and a well conceived
business plan, it is possible to receive a business loan
from your local bank. Grants from the local, state, and
federal governments are available and can actually be a
great source of financing. If this is not an option for
you then you may have to learn how to start a debt
collection agency with your savings or the generosity of
friends and family.
Income Potential:
The income potential for the first full year of operations
can be in the high five to low six figures. Depending on
the type of debts you attempt to collect and the fees you
are able to negotiate, debt collection can truly be a very
profitable business. If you are wanting to know more about
how to start a debt collection business, a good book to
consult is "Start a Home Based Collection
Agency," by Robert Bill.
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