What are receivables and how does their redemption work?

Perhaps every entrepreneur has encountered an unpaid invoice. In the better cases, the reason is just the inattention of the client who did not notice the due date. In the worse ones, it is an irresponsible person from whom you will have to recover the money. However, recovery can be complicated and time-consuming. This is why many people resort to debt buying. How does this process work?

What are receivables?

A claim is the right of a creditor to demand performance of an obligation from a debtor. It arises when you enter into a deferred payment agreement with the other party, or when the person fails to pay a specified amount by the due date. The debt is extinguished on the date the debtor pays it.

The content of the claim is not clearly defined by law. However, it should include basic information, which includes:

• Date,
• the document on the basis of which the claim arises,
• Borrower,
• Amount,
• maturity,
• paid on.

From the date the debt becomes due, you are entitled to recover it by all lawful means.

What is a debt buyout?

Debt collection is an effective way to resolve an unpaid invoice situation. Unfortunately, it is time-consuming and, if you would like to do it on your own, complicated. Therefore, many people think of other equally effective alternatives. If you are one of them, you should be familiar with debt buying.

The way a debt buyout works is that you, as the assignee, sell the debt to someone else who will then collect it from the client, customer or customer. You will thus be free from unnecessary worries and you will be able to concentrate fully on your business.

Methods of debt redemption

Receivables are redeemed in two ways:

Purchase of receivables for immediate funds

The fastest way to get rid of a debt. It is characterised by the fact that it is not linked to whether the other party (the debtor) actually pays the claim. The person to whom you are selling it is also buying it from you , along with the risk that they may not be able to recover it.

Due to the risk involved, receivables are generally sold for a relatively low amount in this type of buy-back. For example, a receivable worth EUR 100 000 may be sold for only EUR 30 000 or EUR 40 000. It all depends on who you are selling it to and what risk is associated with it.

Purchase of deferred receivables

If you find the amount for the debt when redeeming for immediate funds too low, you should take the second option. This is a deferred redemption tied to actual recovery from the debtor.

This method provides you with a higher reward, which can be as much as 80% or more of the original value.

When you want to recover your debts instead

It seems to you that the classic debt recovery is better for you? Then do not hesitate to contact us. At Credit Call we will take care of:

• Early collection – the best prevention against unpaid debts. Call centre staff contact the client just before the invoice is due.
• Out-of-court debt recovery – also known as mandated recovery. This process is conducted by telephone, in writing and in person to settle a debt. The staff enters into a repayment plan or acknowledgement of debt with the debtor.
• Judicial recovery – occurs when out-of-court recovery has been unsuccessful. At Credit Call, we will create all the necessary documents and represent you in court proceedings.
• Recovery of claims from abroad – Do you have foreign clients who owe you something? Thanks to our international network of partner law firms, our staff can collect debts from them too.