Running a business is not an easy job. It requires the ability to make tough decisions, securing capital, satisfying customers to increase revenue and sales. It is a lot of work, and sometimes some businesses have to take a loan to make it all happen successfully.
A business might need to secure a loan from a bank or from another business to sustain itself or start a new project, and so on. They know the risks and liabilities of taking a business loan, and every businessman plans to repay the debt timely.
Unfortunately, sometimes you are unable to pay the debt. It can be due to huge financial losses that a company is facing or they might have more than one debt, and one of them went bad. Since a loan to a business is huge, the lender will involve a collection agency pretty early on in the collection process.
Most businesses have an internal debt collection department that sends demand letters and notices about repayment of the debt, and consequences if they don’t pay on time. They will try to contact you through emails or phone, and if unsuccessful, they will hire a third-party debt collection agency.
If your business is facing genuine problems, talk to the lender early on to sort out a payment plan or negotiate the debt.
In case, you get a collection call, here are some tips on how to handle them.
Tip 1: Answering the call of the collection agency
The first thing, you need to remember here is that you cannot ignore a debt. If you think that collector is wrong in contacting you, still answer the call. They have the power to report to the credit bureau about your debt, which can lead to more financial problems for your business.
Thus, it is best to contact the collector and validate the debt. A collector has a legal obligation to send all evidence and documentation regarding the ownership of the debt. If you have some doubts about how these debt collectors work, this article will help you know some facts.
After the initial contact, you have seven days to send a letter of validation asking for documentation. A business doesn’t have to owe or start paying the debt before they get the documentation.
Once you are sure that the debt is yours, you can plan a payment option.
Tip 2: Do your research
Researching your business and the business who you took the loan from is your next step. You need to sit with your accountant or the team handling the debt and financing. Ask them to go over the documentation to make sure the debt belongs to your business only.
After that, you have to review all the receipts, records, data, and documents regarding loan and other things which transpired during the time period of the debt.
Moreover, you need to research the creditor and your terms of debt, so that there are no problems. Furthermore, sometimes your accounting department may have initiated the payment, but it got late or lost in the process. If you find any such evidence, send that to the collection agency so that they can confirm the payment, and close the account.
Tip 3: Disputing the debt that is not yours
If the documentation proves that the debt doesn’t belong to your business, you need to dispute the claim. For that, you need to have all the legal documents with you which shows that the debt doesn’t belong to you.
Every city has a method for disputing the debt, know that, and inform the collector about the same.
Tip 4: Paying the debt
What do you do if the debt is yours? Paying the debt is ideally the next step. But if your business is in financial trouble or you need more time, you have to talk to the debt collector. Don’t ignore their calls, instead explain the situation to them.
A debt collector wants you to pay without facing any severe consequences. They can help you come with a payment plan or even negotiate the debt amount with the lender on your behalf.
You can figure this out by sitting with both the lender and the collector. The thing to remember here is that once there are changes in the contract, every party should sign it.
Also, make sure you pay the debt amount using a check or in cash and keep the receipt or the documentation for the future.
No one likes to be in debt, but if you have, paying it immediately is the best way to come out of this unscathed.