Despite the impressions you may have, debt collection is a lucrative and necessary business. The majority of debt collection agencies are reputable businesses performing a required function other businesses don’t have the time or resources for. If you’re interested in setting up your own debt collection agency and working from home, here are the basic steps you need to prepare your own start-up.
1) Research Federal and State Laws
This step is essential to understanding how debt collection works. There are strict Federal as well as state laws governing the behavior and operation of debt collectors. Knowing the rules and regulations will not only keep your business running smoothly, it’ll protect you from any litigation through err on your part.
2) Permits, Licenses, Bonding
In order to own and operate a business you will need the standard permits and licensing from your local government unit. In addition, for debt collection, you’ll need special licenses and bondings to handle and collect debt.
3) Set Your Tax Structure
This step is crucial for your debt collection agency or any other business. You will need to consult with with a tax expert to set up your tax plan. Register your business with the IRS. Collection agencies can come under a lot of scrutiny so make sure your t’s are crossed and your i’s are dotted.
4) Determine Your Collection Fee Structure
Determining your collection strategy will set the tone for your business. How much risk do you want to take? If you buy already delinquent debt from companies at a percentage of the amount you stand to make a lot more money keeping whatever they pay off. Yet, you could lose money and it requires more investment. Determining your strategy, when your fees increase, and what percentages are acceptable risks is an important step in your business plan.
5) Set Up a Debt Collection Merchant Account
If you can’t accept electronic payment you are limiting the number of ways your debtors can pay you back—not a good plan. Debt collection agencies can be tricky for opening merchant accounts. Many traditional banks will shy away from opening a debt collection agency merchant account because of the financial and reputation risks involved. Look for reputable alternatives such as eMerchantBroker to help you open a collection agency merchant account.
6) Prepare Collection Methods
When it comes time to collect you’ll need the resources available to notify your debtors of collection. Basic tools are a form letter and a telephone script for calling debtors. Having a prepared method is a fundamental part of being professional and being prepared to interact with companies and individuals with out-standing debt.
7) Market, Build a Customer Base
This is the trick to running a successful collection agency; you need to have clients. Be prepared to create marketing materials and invest long hours in calling businesses that may be in need of a debt collector. Building a customer base can be a long and tedious process so be prepared to put in the hours to build your new collection agency from the ground up.
eMerchantBroker offers the best, experienced team available for opening a collection agency merchant account. Years of experience means we already have the connections to the banks you can work with and we just have to find your business the perfect fit. Apply today and let our team go to work for you.