Are you a creditor considering selling your debts to a debt buyer and thinking “why should I sell my debt“?
If so, you may be feeling a little conflicted about the situation. This is completely normal as it is likely that the debt will be sold for less than you would make by recovering the debt itself.
You may be wondering, why would I even consider this. After all, simply collecting the debt that I am owed would result in a higher income, wouldn’t it?
This is not necessarily the case and selling your debt can result in many added benefits!
In this article, our debt buyers will discuss what selling a debt is and 4 of the ways that it can benefit your business to do so.
What is Debt Selling?
So, you may be wondering what it means to sell a debt. This is a fair question as it may not be a highly discussed alternative to debt recovery in the creditor community!
The term “debt sale” refers to the act of having a debt of yours purchased by and transferred to another company.
This can be a confusing process, but it can also have several negative implications if you are not careful.
It is therefore important that you are properly informed and know how to go about a sale of one of your business’s debts.
The process will generally be conducted between two parties, one being a business, which in this circumstance you are likely the owner of, and a third party referred to as the “debt buyer”, which will most likely be a debt collection business or agency.
This way, the opposite party will have more of the tools to effectively collect your debt.
You can also come to different agreements depending on how you wish to move forward in the matter.
Your arrangement can be a one-time ordeal, or you can agree to continually sell your debts to the debt buyer in question.
Why Should I Sell My Debt?
There are a number of reasons to sell your debt. These include:
- You get a Payment Guarantee
- More Time for Your Business
- Reduced Risk
- Improved Cash Flow
We will explain these in more detail below.
You Get A Payment Guarantee
One of the great benefits of selling your debt to a third-party debt buyer is that you are guaranteed to 100% receive a payment.
Selling your debt to a third party allows your business a guaranteed payment that you don’t have to wait for or follow up on consistently.
You may be thinking, shouldn’t this be the case with my debts anyway? Surely if another party commits to payment with my business, they will follow through, right?
Well, unfortunately, this is not the case more often than you may think! Debtors have things going on in their lives, just like anyone else.
Whether it be financial issues or simply a busy schedule that leads them to forget to make payments on their debts, payments will more than likely be missed by at least one of your debtors.
Debtors, in some circumstances, may not pay their debt at all and instead declare bankruptcy or find some other way out of it.
This can be seriously inconvenient to you as debtors not paying their debts on time can not only take up more of your time pursuing them but can cause serious financial issues within your business.
Selling your debt can save you time in pursuing debtors as well as make sure that you will indeed receive a payment!
Why Should I Sell My Debt – More Time for Your Business
Having more time to manage, update, and grow your business is another one of the great benefits of selling your debt to a debt buyer. Every business owner is short on time.
There are so many tasks, both small and large, that you have to engage in over the course of a day.
This can simply take up all of your time and leave you with none to develop your business.
This can be extremely damaging to your company and mean that while your competitors drive forward, you simply get left behind! Selling your debt can help with that significantly.
As discussed, debts and recovering them from clients can be very time-consuming as a whole and alleviating at least some of that pressure can free up a lot of time to work on other business elements.
Why Should I Sell My Debt – Reduced Risk
Another of the great benefits of selling your debt to another third-party debt buyer is that there is no risk of any kind involved regarding the debt after it is sold.
Managing debts can be quite risky in many ways! For starters, the previously discussed concept of simply never receiving payment from clients can be risky.
Providing services or products to clients only for them to not pay you can be very damaging, especially if the product or service itself was expensive to create or provide.
Selling your debt means that someone will outright pay you for the debt and the days of worrying about clients declaring bankruptcy or insolvency rather than paying you are over!
Another risk factor regarding debt is the legal element. Debts have laws and regulations, just like most other things regarding money in Australia.
There are certain things that you must and must not do in order to stay on the right side of the law.
Unfortunately, this list can be quite detailed and long at times, meaning some elements can simply slip your mind.
Selling your debt means that it is no longer your concern as to whether or not the debt is being collected legally!
Why Should I Sell My Debt – Improved Cash Flow
Improving your cash flow and general finances in your business is yet another way that selling your debt to a third-party debt buyer can potentially benefit your business.
Having a consistent income and, most importantly, having said income as a large enough value to succeed in your business expenses is vital to maintaining a business.
Selling your debt can help with that! Having an instant payment, although it may be less than the debt itself, can help to balance out your cash flow over a specific period.
This can help to improve the general finances of your business and make sure that you can afford to pay for all of your expenses while still having some profit to help your business to expand!
Key Takeaways
Managing debts within a business can be difficult. Chances are you have multiple clients to manage and collect debts from, and not all of them will be willing to cooperate!
This is why selling your debt can be a great choice for your business!
You should ensure that you are engaging in your own research regarding your debts and debt selling, as different circumstances may make the process or result slightly different.
If selling your debts does not seem like a viable option, you may also wish to try debt collection.
Debt collectors are professionals in the area of recovering debt and can therefore collect your debt with much higher success rates!
