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What types of commercial debts may businesses require debt collection lawyers to collect?
Companies rely on a steady cash flow to maintain the business. From unpaid invoices to more intricate debt arrangements, each type of commercial debt presents unique challenges and considerations. Maintaining awareness of the strategies regarding commercial debt collection will help safeguard the financial health of your business.
This guide will explore when businesses may require external debt collection assistance, the types of commercial debts, and how these are processed in the UK.
Click on the links below to jump to that section:
When a creditor may require a debt collection lawyer to help recover outstanding payments.
Consider the best practices for debt collection, and the importance of working with lawyers.
Look through the types of commercial debts that can be collected with the help of experienced lawyers.
Learn more about alternative dispute resolution (ADR) and when it is beneficial.
Read the most common queries on commercial debt collection.
Why may a business require debt collection lawyers?
Despite best efforts, businesses often encounter challenges in recovering debts owed to them by other commercial entities. In the UK, the usual terms of business expect an invoice to be paid in 30 days, with a maximum of 60 days. After this time, debt collection services may be required, including:
Company searches
Conducting thorough company searches can provide valuable insights into potential clients’ financial stability and their capacity to pay invoices when presented together with the history related to potential clients. This information helps businesses assess the risk of non-payment before entering into agreements.
Confirmation of company trading address
Verifying the trading address of a debtor ensures that legal correspondence and debt collection efforts are directed to the correct location, increasing the chances of successful recovery.
Credit scoring
Utilising credit scoring mechanisms enables businesses to assess the creditworthiness of clients and identifying potential risks and taking proactive measures to mitigate them.
Sending a Letter Before Action (LBA)
Prior to sending a formal LBA indicating the intention of taking legal action, businesses should send informal reminders of the debt.
A letter before action is a formal notification to debtors which outlines the outstanding debt, the date when it is expected to be paid, and the consequences of non-payment. This step often prompts debtors to settle their obligations without resorting to legal proceedings.
An LBA is most frequently sent by a debt collection lawyer which indicates to the debtor that legal steps may follow. If the debtor's contact details are unknown, professional lawyers can instruct tracing agents to obtain this information.
Giambrone & Partners provides various legal services regarding debt collection. Once an LBA has been sent and the debtor does not respond, our debt collection lawyers will initiate legal proceedings on receipt of the client’s instructions.
Study our range of debt collection services to see how Giambrone & Partners can help you.
What is the best practice for debt collection?
There are various approaches to recovering debts as a business, both nationally and internationally. Though a business can start the proceedings itself, it is recommended to acquire legal assistance. For smaller debts, you may balance the time and costs in collecting a small amount and consider writing off the debt.
If this is not desirable or the amount is too great, the following solutions should be considered:
Contacting the customer or business
If a commercial debt has been ignored or even refuted, a business may want to consider contacting the debtor informally to learn their reasons for avoiding payment. Chances are, there may be a misunderstanding with the outstanding invoice, and the matter can be settled without the need for further debt collection services. This informal communication may help appear non-threatening and help protect business relationships. Ensure any communication between the parties is recorded and kept as evidence.
Sending a debt collection Letter before Action
In some instances, a more formal approach may need to be implemented. A Letter Before Action (LBA) should detail the amount of the debt, the proof of delivery, and when the outstanding fund should be paid.
Issuing County Court proceedings
Sending an LBA potentially instigates legal action against the debtor, as it proves the intention of filing an official claim. It is recommended that legal action occur in the country where the debt took place. If the debt occurred in the UK, a County Court Judgment (CCJ) can be issued against the debtor.
Find out more about enforcing English court orders for cross-border debts with our expert guide here.
Seeking legal assistance
To ensure a smooth and time-conscious debt collection procedure, commercial enterprises should consider seeking legal advice from an expert debt collection lawyer. ─Accidentally lost the link They can use their expertise to determine the most suitable enforcement route to pursue.
Find out more about the steps a business can take against a debtor with our expert guide here.
The different types of commercial debts
Commercial debts come in various forms, each requiring a tailored approach to recovery. Some common types of commercial debts include:
Unpaid debt and invoices
Overdue rent payments
Unpaid commercial loans and credits
Unpaid bills for goods and services
Unpaid salaries and wages
Unpaid legal fees or judgments
Cross-border debts
Businesses may find dealing with international enterprises confusing, particularly if an outstanding invoice occurs. It can be difficult to understand the jurisdiction, the limitation periods to consider, and how it may impact international trading.
To simplify recovering cross-border debts, seek legal advice from debt collection lawyers. They will offer bespoke advice depending on the amount of the debt, the type of commercial debt, and the difficulty of the recovery.
Request a call back with Giambrone & Partners' debt collection lawyers today for information on our services.
Alternatives to commercial debt recovery methods
Many businesses may prefer solutions that solve the issues outside of the court, such as a small business (SME), which may not have the time or the resources. Alternative dispute resolution (ADR) is a term involving more than one way of resolving disputes without court involvement. Three forms of ADR are:
Negotiation: This the most informal method of dispute resolution, it is voluntary, where the parties involved attempt to reach an agreement themselves without an independent third party. This can often lead to voluntary repayment agreements without the need for formal legal action while preserving the business relationship.
Mediation: Mediation involves negotiations between parties with an appointed external mediator to reach a mutually agreeable settlement. Mediators here all aspects of the dispute and explore creative solutions to resolve disputes amicably; however, the mediator’s decision is not legally binding.
Arbitration: Resolving disputes through arbitration offers a faster and more cost-effective alternative to litigation, allowing parties to reach a mutually acceptable outcome with the assistance of a neutral arbitrator. The process of arbitration is more formal and the arbitrator can make a legally binding decision.
Giambrone & Partners is a leading law firm specialising in commercial debt collection and dispute resolution. With extensive experience and expertise in both domestic and international debt recovery, our team of lawyers are well-equipped to assist British businesses in the complexities of debt collection.
For expert legal representation and debt collection advice, contact Giambrone & Partners to request a call back.
Frequently asked questions
What are the implications of Brexit on commercial debt collection in the UK?
Brexit has introduced several implications for commercial debt collection in the UK. This includes the potential impact on cross-border debt recovery within the EU, as UK businesses now face increased complexity and possible delays in recovering debts from EU debtors.