Debt Collection for Your Gym Business

Ideally, all of a company’s clients would pay every invoice and bill on time. However, that’s not a reality even large enterprises live in. There will nearly always be a percentage of customers who pay late or don’t pay at all. While companies sometimes handle debt collection in-house, many small businesses don’t have the bandwidth to do that.

Instead, debt collection for smaller companies tends to involve hiring an outside agency. A debt collection agency has experts on hand familiar with debt collection regulations and best practices. Moreover, an agency can help your small business design and execute a debt collection strategy. Let’s examine how debt collection for small business organizations works.

What Is a Debt Collection Agency?

A debt collection agency is a company that collects outstanding debts for another person or business. Some agencies may also purchase bad debts from other businesses and then try to collect on them. Say you have a revolving line of credit and are 90 days past due on one of your minimum monthly payments. An agency will call or write to you to encourage you to pay.

Debt collection agencies can also reach out to associates or relatives of someone who owes a debt. Agencies do this to find that person or get updated contact information. In doing so, they must abide by the Fair Debt Collections Practices Act. Unfair practices include pressuring people to pay more than the original debt unless allowed by law or contract.

When making a debt collection agency list, verify the agency practices fair debt collection techniques. In addition, check to see if the agencies are licensed in the state your small business operates in. Many states and some cities mandate this. You can also ask for client references and skim reviews or testimonials.

How Collection Agencies Work

A collection agency needs to know the ins and outs of the financials of your business. That includes your existing invoicing and accounts receivables practices. To come up with debt collection strategies for your business, an agency will need to know how many invoices are in arrears. In other words, how much is past due, and how long has it been outstanding.

Collection agencies will want a list of customers who owe your business money. Once agencies collect the debt, they turn over what is owed to you. However, debt collection through an agency does come at a cost. Agencies will deduct their fees from the amounts they recover.

This structure is similar to working with a real estate agent. The agent does not collect a commission or a fee unless they close the deal. Once they sell a home or help you buy one, they then collect their commission from the seller’s proceeds. Likewise, debt collection agencies don’t charge a fee until debts are successfully recovered.

Debt Collection Regulations 2022

The Federal Trade Commission (FTC) outlines many debt collection regulations for agencies and companies. Debt collection for small business firms falls under these stipulations. Any agency working on your behalf or an in-house team will need to adhere to these standards.

Debt collectors cannot contact people at work.

Agencies and collectors cannot reach out to clients before 8 am or after 9 pm. This rule applies to the client’s local time zone. The exception is if the customer and debt collector agree to a phone call outside of 8 am to 9 pm.

Business debts are not covered by the Fair Debt Collections Practice Act. However, personal debts like student loans and mortgages are.

Debt collection agencies can call, email, send letters, or use text messages to collect on a past-due debt.

Consumers can request agencies stop contacting them.

Debt collectors cannot harass or threaten clients. Agencies also must represent the business accurately and cannot attempt to collect anything else but what someone owes.

How Should I Choose a Debt Collection Agency for My Small Business?

Finding the best collection agency for small business debts starts with a search. You can look online for debt collection agencies near me or debt collection agencies for small businesses. Checking with the local chamber of commerce or asking someone you know for referrals are additional ways to find a good agency.

While you’re searching, go beyond recommendations and online reviews. Interview different agencies and verify their practices are ethical. You can look up agencies with the Better Business Bureau, the Consumer Financial Protection Bureau, and your state attorney’s office.

One of the pros and cons of buying an existing business is that you may be inheriting a debt collection agency. With that in mind, see if there is a contract in place. Even if there is, do your due diligence. After all, you don’t want to continue a relationship with an unethical agency.

How Much Does It Cost To Hire a Collection Agency?

A collection agency is going to charge fees for each collected debt. These fees usually represent a percentage of the debt. However, many agencies base those percentages on the size or age of the debt. Some debt collectors will negotiate reduced fees with small businesses.

More than likely, you’re going to find a range of fees out there. Nonetheless, smaller and older debts usually come with higher percentages. These fees can be as high as 50% of the collected amounts. As debts get larger and fresher, that figure can be as small as 10%.

Best Collection Agency for Small Business in 2022

The best debt collection agency for your small business is going to be one that can match your must-have criteria. Maybe that’s one you can easily meet with and is well-versed in state laws. On the other hand, maybe your small business needs an agency that represents other companies nationwide and has an extensive network.

As you consider what kind of debt collection for small business you need, you’ll get a sense of which ones will make your shortlist. That being said, the most important factor is ethical practices and a sound track record. Be sure to check for the number and nature of any complaints before hiring a collection agency.

Click here for more details on financing options or call 214-629-7223 or email for more information. Or, apply now.

An Outsourced CEO and expert witness, Jim Thomas is the founder and president of Fitness Management USA Inc., a management consulting, turnaround and brokerage firm specializing in the gym and sports industry. With more than 25 years of experience owning, operating and managing clubs of all sizes, Thomas lectures and delivers seminars, webinars and workshops across the globe on the practical skills required to successfully overcome obscurity, improve sales, build teamwork and market fitness programs and products. Visit his Web site at: or

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