Posted on: 12 February 2015
You've just decided to boost your company's working capital by selling some of your unpaid debts or invoices to a debt portfolio buyer. That is a great decision, but to ensure you benefit as much as possible from your choice, you need to ensure that you snag a great price for your debts. Here are four tips to help you increase the price you get for your debts:
1. Include clear and well organized documentation with each debt.
In most cases, when debt portfolios are purchased, they simply contain a list of the debtors, the name of the original creditor and the amount owed. However, there are instances where consumers have successfully argued against their liability for a debt based on lack of documentation. If the person you sell the debt to has documentation about when the debt was incurred, when and why any fees were added, and any other relevant details, it can make the debt more valuable to them. By offering the debt buyer documentation on each debt, you may be able to drive up the price.
2. Increase the average age of the unpaid debts in your portfolio.
Numbers from the Federal Trade Commission find that the average price for debt is 4 cents on the dollar. That means that if you have an unpaid debt for $100, you can sell it for $4. If you have an unpaid stack of invoices worth $50,000, that number climbs to $2,000.
However, that is simply the average, and real figures vary wildly, based predominantly on the age of the debts. Accounts that are less than three years old, for example, sell for an average of almost 8 cents on the dollar, while those between six and fifteen years of age sell for just over 2 cents on the dollar.
If you are trying to get a good price on your debts, try to bring down the average age of your portfolio. If there are super old debts that you think have zero chance of recovery, remove them from the portfolio or put them in a special "old" debt bundle so they do not unnecessarily increase the average age of your entire debt portfolio. Similarly, if you have any newer debts that you can't seem to collect on your own, add those to your portfolio to bring down the average age.
3. Look for a debt buyer who has experience with accounts of your size.
Debt buyers handle debts worth a range of values. Some may buy hundreds of thousands or even millions of dollars of unpaid debts from credit card companies or mortgage companies. Others, in contrast, may focus on buying relatively small unpaid invoices from businesses. In most cases, you will garner a better price if you work with a company who specializes in dealing with the type and size of debts that you have.
If you only have $10,000 in unpaid invoices, for example, a debt buyer who typically works with million dollar portfolios may not be the right option for you. On the other hand, if you need to sell millions of dollars worth of unpaid debts, a company that buys small debt portfolios may not even have the capital on hand to deal with your request.
4. Find debt portfolio buyers who are FDCPA compliant.
Even if you sell a debt, it remains connected to your company by name, and because of that, whomever you sell the debt to represents your company in a roundabout way. Ideally, you need to select a company who is compliant with the terms of the FDCPA (Fair Debt Collection Practices Act), which governs how third-party debts are collected. Hiring a company with a good reputation ensures that you and your brand are never connected with an unscrupulous company, and as a result, that protects your brand, which ultimately protects your bottom line. Follow the link for more information on selling debt.Share