How to Open a Collection Agency
If you are going to start a collection agency then there are steps you need to follow. You have to make sure you are in compliance with county and state regulations. It would be helpful if you have had some collection experience. With experience you can make an easier transition into the collections field. Sales skills as well as negotiating skills are necessary. You will need skip tracing skills along with knowledge of the Fair Debt Collection Practices Act.
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Instructions
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Determine what type of business you will become. You can choose from a sole proprietorship, business partnership, Limited liability Corporation, (LLC) or a corporation. Each form of business comes with its own advantages and disadvantages.
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Write out a business plan. You can do a business plan yourself or hire someone to do it for you. A business plan serves as a road map or a blueprint for your business, and it includes information about advertising and marketing and future growth opportunities. You should include revenue, sales and costs of doing business as well. Your business plan will help you attract capital from banks or other lending institutions.
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Get the correct licenses and permits. You need to check with the county, state and other regulators to make sure you have the correct license to do business. You will need a license for the state where your business is located. If you collect debts in other states, you have to be licensed in those states as well
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Start from your home. Many small business owners start right from their home. As you grow and get more customers you can rent a small office space. Starting out in an office space can be costly if you don't have any revenue coming in.
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Get some clients. Contact banks, financial institutions or retail outlets and let them know you are in the collections business. Offer to do second placement accounts. These are accounts that one collection agency has already worked to a conclusion and the account has been closed because it could not collect money from the debtor. These are tough, but if you can collect on these a company may turn its entire portfolio of bad debts over to you.
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Tips & Warnings
Contact your tax professional or accountant to see if you can write off any expenses for working out of your home Always sound familiar when collecting a debt. A debtor is more likely to listen and stay on the phone. Have extensive knowledge of the Fair Debt Collection Practices Act Know the different state laws Know the Statue of limitations for the states from which you collect.
Abide by the Fair Debt Collection Practices Act. This lets you know what your company can and cannot do when attempting to collect debts. If you fail to abide by the guidelines your company could be subject to penalties and lawsuits. You could be reported to the Federal Trade Commission.
