What Do I Need to Start a Debt Collection Business?

Many different kinds of businesses seek the services of debt collectors, especially in times of economic hardship. A debt collection business can be quite profitable and can operate from your home or a small business office. The most important imperatives for a debt-collection business owner is obtaining customers and then finding the debtors. Aside from these, several additional items need consideration to start a debt collection business.


Experience and Professional Organizations

Before starting your own company, it is vital that you work within a debt collection agency first. Here you can see how the entire process works and get some hands-on experience on working as a debt collector. Aside from on-the-job training, becoming a member of two professional organizations are great sources of support and information. The International Association of Professional Debt Arbitrators (IAPDA) offers online training courses with the purpose of obtaining a certified debt specialist certification. The IAPDA also offers online support and the newest available online education tools. The Association of Settlement Companies (TASC) lobbies on behalf of debt collection companies and ensures that its members are practicing fair and ethical debt collection.

Permits and Licenses

Every state has specific qualifications to license a debt collection business. Many states do not require a collections license at all. To determine the requirements for your state, visit Business.gov to use the “Permit Me” tool. This tool prompts you to enter your city/state or zip code and the desired field (“Debt Collection Agency”). The following page displays the business licenses and permits necessary for your state. Local permits may include tax, building, health, occupational signage, alarm and zoning.


A debt collection business registers with the state in which it resides. If you are the sole owner, the legal name is your full name. All legal or governmental forms require this name as your business name. If your debt collection business has a name other than yours as its title, you need to file a fictitious name registration with your government agency. You also need to decide which business entity to establish (sole proprietorship, partnership, corporation, or limited liability company). The business entity registration is through your state government. You also have to register for state and local taxes, obtain a tax identification number, workers’ compensation, unemployment and disability insurance.

Start Up Costs

A debt collection business does not require massive start up costs, nor should it require high overhead costs. However, it does require some cash with which to start. Your commission from clients ranges from 20 to 30 percent of what you collect, but commissions do not arrive until the payment comes in from the debtors. With this in mind, be prepared to pay gas, mileage and wages with another source of money until you start receiving commissions. Financing is one option, but business loans from your bank may be difficult to obtain even if you have good credit and a solid business plan.

Office Supplies

You will need an office stocked with essentials like a computer, phone line(s), fax machine, printer and Internet access. You should also obtain a filing cabinet and/or software to manage your files. Collections software and downloads can outfit your computer with reports, forms, skip tracing, employment tracking, and security profiles, among other things.

Marketing Materials

Design, or hire someone to design, brochures, signs, business cards and letterhead for your debt collection business. Write a letter to local businesses that may need your services and introduce yourself. Use company letterhead to print the letter and make sure the letter is clear, concise and grammatically correct. Call local businesses to make appointments with owners and offer your services.

Legal Help

Obtain a collection attorney to support your agency in its endeavors. A collection attorney assists you in limiting your own liability and increases your success in debt collection. If legal steps need to be taken, your lawyer helps you secure a judgment against the debtor and protects and enforces the rights of your creditors.



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