Debt collection is a lucrative business, but it’s difficult to get started.
Nearly 100 million Americans are contacted by debt collectors every year. A good number of existing debt collections services are either scammers or poorly run operations. These stress out consumers and small businesses alike.
There’s a real need for honest debt collection work. Countless small-to-large businesses need these services in order to survive.
In this post, we’re going to tell you how to start your own debt collections agency in 2022. If you’ve got the knack for doing this difficult work, then keep reading and learn how to turn it into a lucrative career.
Table of Contents
Write a Business Plan
Any burgeoning small business, whether it’s a collections agency or a toy store, needs to start with a business plan. This will outline everything you need to do to prepare for the world of collections – from the costs associated with starting a collections business to how you’ll find your customers.
A business plan will act as a roadmap for the first months and years of running your collections business. If you’re looking for funding to get up and running, there’s a good chance they’ll ask to see your business plan. You can find business plan templates online that can help you get started.
Understand Collections Agency Licensing Requirements
There are specific licensing requirements to start a collections agency. This industry is heavily regulated, so you need to be well-versed in your state’s collections laws before you apply for a license.
You can discover more here about collections agency licensing. It’s an integral part of the process of starting your agency. No businesses are going to want to work with an unlicensed debt collector.
Get the Business Logistics Settled
In addition to licensing, you need to get the other business logistics settled before you can launch your agency. Getting bonded and insured, forming a business entity, naming your business, and applying for an EIN are all important aspects of starting a business.
You’ll also want to look into joining a credited organization. This will further establish your legitimacy. There are several credit management associations in America, each one providing different perks to its members.
Buying Equipment
Next, you’ll have to decide where you’re going to operate your business. You can start a collections agency from your home, but as you grow, you’ll need to think about an office and equipment.
You’ll need a computer, an internet connection, phones, phone accessories, and other office supplies.
Build Your Network of Clients
Marketing your services to other businesses can be difficult. You’ll need to do some research to find the target customer in your area. Look for medical offices, banks, car dealerships, and property owners – companies that often have customers with delinquent payments.
How you deal with your first customers will help you establish a reputation in the industry. Make sure to charge on a contingency basis and ask happy customers to leave you a review.
Start Collecting ASAP
Now that you understand how to start a collections agency, get your business logistics and licenses sorted out ASAP. Once you get your first clients, a debt collection business can be extremely lucrative.
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