Satisfying commercial debts is of paramount importance when you own a business. Unsettled debts can disrupt cash flow, hinder growth opportunities and strain relationships with suppliers or clients.
Fortunately, there are commercial debt collection strategies that can guide you through this dilemma.
Communicate openly
When communicating with debtors, respect and professionalism can be beneficial. Contact your debtor in writing to discuss the debt, its terms and possible repayment options. Be clear and concise in your communication and keep records of conversations and correspondence.
In some cases, debtors may be willing to discuss and agree to a repayment plan that suits both parties. Negotiation and payment plans are generally preferable to litigation and can help your business save time and expenses. In some cases, you should explore dispute resolution options such as mediation before taking legal action to recover debts.
Take legal action
If negotiations fail, you have several options. Some businesses opt to sell commercial debts. Although this strategy requires less work than going to court, you could lose money by choosing this path. Debts tend to sell for a fraction of their initial value, often returning mere pennies on the dollar.
You can also file a lawsuit against the debtor. This can be a highly effective approach; however, even if your case succeeds, you might have to take additional steps to collect your debt fully. For example, you might use a bank levy to obtain funds from your debtor’s account.
Although less common, a real property levy can lead to foreclosure or property sale if your debtor owns property with equity. An account receivable levy can help when your debtor has customers who owe them money. Finally, if your debtor is an employee, you might be able to garnish their wages and collect a portion of their paycheck from their employer.
You can maintain a stable financial foundation and safeguard the long-term success of your business by taking steps to resolve commercial debts in a timely and efficient manner.