Debt Collection Agency has a very important role in the economy of any country, they play an important role in ensuring that the loan given is paid within a reasonable time frame. Apart from this, the companies which provide their products and services in confidence without paying to anyone or in the invoice on a monthly, quarterly, half-yearly, annual basis, those companies also take the help of Debt Collection Agency for the collection of debt.
The service of this type of agency can be availed not only by business organizations but also by all types of organizations and individual individuals. Suppose you have given a loan to a person with a huge amount and he could not return your money on time, in such a situation, if you want, you can try to get your money out by taking the help of this type of agent. Apart from this, suppose a business organization is selling its products to another company. And the company pays him all the orders he gets in a month together.
But at one point it came that the company did not pay for one month, on-demand, it said that the order for two months would be paid together. But in the second month also the company did not pay that business organization, now the outstanding amount was in crores. The company kept on taking the goods but did not pay, so the business organization made every effort to get the money at its level but failed. Now that business organization will take the help of a Debt Collection Agency to withdraw its money and the agency will get some percentage of the total amount as commission.
What is Debt Collection Agency?
As the name suggests, debt collection can be used to recover loans, such agencies take the help of individual individuals or organizations whose money is stuck outside. In clear words, the job of the Debt Collection Agency is to collect debts from the debtors, so they can also be known as agents of creditors. That is, an agency that helps its customers to get their stuck money out is called a debt collection agency.
And in return, the agency takes some percentage from the loan raised as a commission to earn its income. The services of these companies are availed by financial companies, banks, organizations selling goods and goods, individual individuals, etc. But in today’s scenario, the debt collection agency buys that debt from the creditor in advance and takes on the responsibility of collecting that debt from the debtor. There is risk in this so if the agency is successful in realizing that loan then it makes a lot of profit.
Requirement of a debt collection agency
Lending is also necessary in today’s business scenario only then the finance company and bank will be able to run smoothly and successfully. Financial institutions and banks do the work of giving loans to the people because at present, whoever needs a loan, must go to the financial institution and the formal sources like banks to ask for the loan. Apart from this, business between companies also runs on the basis of credit, invoice, monthly payment etc.
And man also keeps on taking loans from other human beings, so overall, debt has a very important role in the economy. Even sellers selling goods and services are compelled to lend their goods and services. Most of this loan is repaid to the business organizations, but some people and business organizations refuse or keep on delaying the payment of the goods, services or money that have been borrowed.
In such a situation, Debt Collection Agency is required to collect loans from such individuals or organizations. Such an agency also acts independently as an agent of the creditor and by purchasing the credit itself at cheaper rates. Such an agency also has to persuade individual individuals or organizations to collect loans within the ambit of the laws. The agency is not at liberty to take any illegal step.
How to Start a Debt Collection Agency?
However, many financial institutions and banks whose job is to give loans to individuals and business establishments have their own debt collection department. But most organizations get this work done through a third party because they lack the resources and skills to do all this work. An entrepreneur starting a Debt Collection Agency has to keep one more thing in mind that he or his agency does not have the freedom to take any kind of illegal steps for the collection of debt.
Even if a person or business entity is indebted to you and is refusing to give your loan, you can only use legal ramifications against them. The law does not provide for the freedom to collect debts illegally. So let us know how an interested person can start his own loan collection agency.
1. Learn about how agencies work
It is very important for an entrepreneur wanting to start his own Debt Collection Agency first of all, how does such an agency work? Because as we have already told that it is easy to give a loan to anyone but to collect that loan that too in those situations when the debtor has refused to repay the loan or he is refusing to pay the loan. . So the entrepreneur should not only be aware of how a debt collection agency works.
Rather he also needs to get practical experience of this so that no untoward incident takes place through his agency in future. When the aspiring entrepreneur works with an already established agency, he or she will be able to find out whether there is more profit in buying loans or by acting as an agent of creditors. And by estimating what things the loan will come or not, it can be estimated.
By the way, the agency requests the debtors to pay the debt through email, message or phone call to pay the outstanding debts, apart from this, the agency uses much software to extract the correct information of the debtors. Because any Debt Collection Agency completely depends on the debtor, it is necessary for the debtor to agree to repay the debt. Because no agency has the right to withdraw money directly from the debtor’s bank account, even when the agency knows what the debtor’s bank account number is and how much money is deposited in it.
Yes, it is necessary that when the court has given a decision against the debtor, then the agency can take permission from the bank or the employer. The entrepreneur will come to know about the working style of this type of agency only when he himself works in such agency for a few months or years.
2. For Debt Collection set up your own office
Now if the entrepreneur has decided to start a Debt Collection Agency, then his next step should be to set up an office. An entrepreneur cannot start this work alone, in the initial stage itself he will need at least four to five skilled employees, so the entrepreneur will have to make such arrangements in the office so that the employees can work comfortably without disturbing.
For this, the entrepreneur will have to fully furnish the office and also take special care of lighting etc. As office equipment, the entrepreneur may need some computer, laptop, printer, software, chair, telephone etc.
3. Obtain the required licenses and registrations
Following licenses and registration may be required to start a Debt Collection Agency.
- Searching the name of the agency and its registration.
- Registration as Proprietorship or One Person Company.
- GST Registration.
- License from local authority like Municipal Corporation etc.
- Current account with the bank and PAN card in the name of the agency.
- TAN number to deduct tax on salary.
4. Deploy skilled and required manpower
The debt Collection agency will not be able to run successfully by the entrepreneur even if he wants, he will need a very well-organized and trained team to communicate with the debtors. If a debtor is not ready to repay the loan even after adopting all the means, then there may also be a need to appoint an advocate to take legal action against him. To start this type of business, the entrepreneur needs to be educated and professional people, so it is natural that the salary involved will be very high.
5. Buy a loan or act as an agent of creditors
Now all the procedures have been completed by the entrepreneur to start Debt Collection Agency, so now the next step of the entrepreneur should be to work. The agency has two options to work, firstly, the agency should act as an agent of the creditors and when it is successful in recovering any debt, then keep its fixed share as commission.
Another way is that the agency buys that loan from the creditor at a cheaper price and then recovers that loan from the debtors. But in order to start work in another way, the entrepreneur not only needs to invest a lot but the risk is also high. Therefore, in the initial phase, it is better if the entrepreneur acts as an agent of the creditors in the earlier way.