Shouldn't Business Be Booming? in This Down Economy, B2B Collection Agencies Are Struggling, Too
Byline: Jean Murphy Suburban Business Correspondent
Collection agencies that resolve business-to-business debts experienced a 30 percent to 40 percent surge in new business when the economy first tumbled between late 2007 and early 2009, according to local agency statistics. However, that didn't necessarily translate into an equivalent financial success.
Agencies including Biehl and Biehl in Carol Stream, Brennan and Clark in Villa Park and Credit Decisions International in Elk Grove Village all hired more staff to handle the extra work. Biehl and Biehl, for instance, had to ramp up for a 60 percent increase in sales during 2009.
But contrary to what you might expect, the influx of additional accounts was not a gold mine for the collectors because in many cases they were hired to contact failed businesses from which there was little chance of collecting, said Lou Figueroa, president of Credit Decisions International.
Other area collection agencies, whose fees depend upon the money they are able to recover, experienced the same trend.
"There was a huge influx of business, but little chance of recovering many assets," said Brennan and Clark President Meg Scotty. "We were seeing an unprecedented number of bankruptcies and companies just dissolving, and since the economy had been so strong, only about 5 percent of business owners had been required to sign personal guarantees that we could pursue."
In those early days, Scotty said, the company was busy with triage, sorting through the new placements to decide what was "dead on arrival" and what could possibly be saved.
"We spent lots of money on our company infrastructure to make sure that we could handle the accounts efficiently. Otherwise we wouldn't have been able to remain in business ourselves, since the amount of money being recovered, compared to the number of (new accounts), plummeted," Scotty said.
"When a small business goes bust, it is usually just that. They don't have any tangible assets to go after because they have leased everything," said Bill Biehl, president of Biehl and Biehl.
Consequently, Scotty admits she became very adept at delivering bad news to her clients, telling them that many debts would have to be written off. They couldn't even sue because no attorney would take the cases since there was nothing to be gained.
Debtors that were still in business, on the other hand, were put on more repayment plans than ever before, although Biehl said agencies tried to keep those plans to no more than 90 days since the longer the duration of the plan, the greater chance of default. …