Articles by Shaya Gorkin
It’s been a hectic few years on the economic front.
From the shaky first days of the COVID-19 pandemic and the havoc in the economic system still ongoing, to the supply chain shocks and Russia’s war in Ukraine, it has been a time of deep economic uncertainty.
These crises had–and continue to have–a significant impact on individuals and businesses around the world. As many lost their jobs and saw their income reduced, it is likely that a large percentage accumulated debt during this time, furthering the financial struggles up the chain as more and more businesses had to contort themselves to stay afloat, despite their outstanding receivables.
As economies begin to recover and adapt to the current moment, businesses will be looking to collect what they are owed, but it’s important to consider how debt collection practices may evolve in a post-COVID world and how individuals and businesses can manage their debt.
Debt collection practices have traditionally been viewed as harsh and unforgiving, but as the world adapts to the new normal, the collection industry will need to evolve to be more compassionate and flexible.
As collections agencies, our job is to represent the interests of our clients who are looking to collect what is owed to them and recover as much of it as possible.
Collection agencies will need to take into account the fact that many people and businesses have been hit hard by the pandemic, and may not be in a position to repay their debts in full or at the pace creditors are used to.
One way in which collection agencies can evolve is by offering some form of a settlement that would involve a more flexible repayment plan. Rather than insisting on a fixed repayment schedule, collection agencies may need to consider allowing debtors to make smaller, more manageable payments over a longer period of time. This could involve negotiating a lower interest rate or waiving fees.
Another way in which collection agencies can adapt to the current moment is by offering debtors a reduction in the overall debt if the full balance is paid in lump. This involves the debtor agreeing to pay a lump sum amount that is less than the total amount owed. In some cases, this may be the only viable option for debtors who are struggling to make payments, and the only way a business can expect to see any of their money back. Collection agencies can be the conduit and work with both sides to negotiate a settlement that is reasonable and manageable for all parties involved.
Communication is also key, and never more important than it is right now. It’s crucial for collection agencies to be transparent and open in their communications with debtors. This means providing clear information about the amount owed, the payment schedule, and any fees or penalties that may be incurred. It also means being open to questions and concerns from debtors and providing them with accurate and timely information about their debt.
For individuals and businesses struggling with debt, there are several steps that can be taken to manage their debt effectively. Proactively communicating and working with your creditors offers the best chance at a reconciliatory solution.
The first step is to assess the situation and determine the total amount owed. This can be done by reviewing credit reports and contacting creditors to obtain a full picture of the debt.
Once the amount owed has been determined, the next step is to create a budget that takes into account all income and expenses. This will help to identify areas where expenses can be reduced and savings can be made. It may also be necessary to consider increasing income by taking on additional work or selling assets.
Once a budget has been established, it is important to prioritize debt repayment. This may involve negotiating a repayment plan with creditors or seeking the assistance of a credit counseling service. In some cases, it may be necessary to consider a debt consolidation loan or a balance transfer credit card to simplify payments and reduce interest rates.
Finally, it is important to maintain a positive attitude and stay focused on the goal of becoming debt-free. This may require making difficult decisions and sacrifices in the short term, but the long-term benefits of debt freedom are well worth the effort.
With a good-faith-first approach from creditors, debtors and collection agencies, it is possible to manage and clear debt effectively, even in an uncertain economic climate, and achieve financial security for all parties.
Shaya Gorkin is an experienced attorney and the COO of Monetaria Group, a premier collections agency specializing in merchant cash advance and commercial debt recovery. To connect with Shaya, email firstname.lastname@example.org.
With the benefit of our collective decade of experience working in collections for the merchant cash advance industry, our team at Monetaria Group has come to understand all too well the importance of recovering funds for our clients and all the difficulties associated with that. The MCA sector poses distinct obstacles and challenges for collections; but, by implementing the correct systems and strategies, we’ve found that outstanding payments be recovered, without it having to be a painful and drawn-out experience.
Here are five key strategies for better MCA collections that we have implemented with our clients, that can help you too:
1. Be familiar with the industry you’re being asked to advance.
Often, MCA companies offer small businesses short-term funding in their moments of need. This means that the funders are betting on the business’s ability to take advantage of the opportunity being offered to them and turn the ship around, enabling them to repay the advance without any complications or issues.
To ensure you are giving your company the best chance of getting its money back, it is essential for funders to have an understanding of the industry and the businesses they are working with to be able to evaluate their advance worthiness and anticipate fluctuations in repayment ability.
2. Establish relationships and overcommunicate.
Having strong relationships goes a long way in MCA collections, for both the funders and their clients. Establishing trust and open communication with clients will inevitably lead to a better understanding of their specific needs and challenges. Additionally, it goes without saying that developing positive customer relationships can lead to more successful negotiations and repayment agreements.
3. Be proactive and offer solutions.
Instead of passively waiting for merchants to default, proactively reach out to them to check in and see if it’s time to discuss reconciliation and other solutions. This shows a willingness to work with them and allows for potential issues to be addressed before they become major problems.
4. Utilize the best available technology.
Over the past decade, the merchant cash advance space has seen an explosion in the creation CRMs and softwares to service and assist the MCA businesses. Utilizing these technologies will greatly improve the efficiency and effectiveness of your business and will be a great asset in ensuring you are collecting all that is owed to you. Look for the services that offer the features you need, such as custom reports, client breakdowns, automated payment reminders, online portals for customers to make payments, and data analytics- they are all out there ready to assist you.
5. Have a contingency plan.
Despite your best efforts, some merchants will still default. Having a well-crafted contingency plan in place that doesn’t put all your eggs in one basket will minimize the potential negative impact on your business. This includes doing a very thorough underwriting of the merchant’s business. Additionally, be prepared to explore your options in terms of collecting what is owed to you. This may include selling the debt, restructuring the payment, hiring a qualified third-party debt recovery agency, or legal action.
Having all these in place will more than adequately prepare you for a successful MCA collections experience, and help you avoid all the stress and headaches it can present otherwise.