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Is it difficult to start a debt management business?

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Starting a business is difficult. You must be motivated and enthusiastic about your product or service to succeed. But even with determination and a solid business plan, this can be difficult. Surprisingly, in the UK, one in four businesses fail in the first five years.

A bad cash flow is a major problem for businesses. An American study found that this is the main reason why businesses fail, followed by a lack of need for the specific product or service.

But despite the challenges and potential pitfalls, entrepreneurs continue to think of new ideas and create some of the greatest services and products we have today.

Unless you can identify a gap in the marketplace, starting a business in a well-established industry is a good idea – if you have the right qualities and the right skills to offer. However, this still presents challenges and is particularly true for those who wish to work in the debt management sector.

In the United Kingdom, the insolvency of individuals and businesses increases. The worrying levels of debt mean that more people are turning to debt management solutions such as IVAs and debt management plans.

There is a need for regulated advisors and debt management companies to help people manage their debt. But starting a business that needs to be regulated by the Financial Conduct Authority (FCA) requires a lot of work.

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Anyone wishing to enter this market will have to do extensive research and be willing to adhere to best practices and regulations established by the FCA. Below we explain how this can be done and what is needed.

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Compliance with the guidelines of the Financial Conduct Authority

The Financial Conduct Authority (FCA) regulates nearly 60,000 financial services in the United Kingdom. Its goal is to ensure that financial companies work fairly, which benefits consumers.

In 2014, the FCA took over the regulation of debt management companies. Meanwhile, many debt companies went bankrupt. Those who stopped their activities were not working in the best interest of the consumer and swindled those who were in debt with even more money.

Now, all businesses must be registered with the FCA and demonstrate how they adhere to the guidelines. These guidelines cover a variety of topics, including marketing and service fees.

If you want to create a debt management company, you must first familiarize yourself with the regulations so you can apply it to your new business. All debt companies must also be PSD2 compliant. For more information on what you will need to do before applying, refer to the FCA checklist.

<img class="aligncenter size-full wp-image-39651" src="" alt=" Debt Management Specialist Using the Software "width =" 810 "height =" 540 "/>

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Get the Best Debt Management Software

In addition to knowing the guidelines and becoming a regulated company, there are other essential elements you need to start a successful debt management company.

Companies dealing with indebted customers will have to get a lot of information. Once your client begins paying off debt, it becomes essential for you to monitor repayments and maintain accurate records.

Finding the right debt management software to handle this information is crucial. Your software should do the following:

  • Complying with GDPR Guidelines – GDPR regulations mean that businesses need to be more aware than ever of where personal data is stored and who has access to it.
  • Be flexible according to your needs – The ability to customize the system without having to wait for the development of additional software is essential. This means that every business can create a fast, easy-to-use process workflow.
  • Save accurate and easily accessible information – With the amount of data to store and the large number of customers with whom a business can process at any time, keeping all data up-to-date and correct is vital.
  • Finding the Best Solution for the Customer – The software should be able to generate a standard financial statement (SFS) that can indicate areas of excessive spending by customers. By getting this information, debt management companies can analyze this to find out which debt management solution is best for their client.
  • Facilitating communication with customers and creditors – Automated correspondence, such as print, SMS, e-mail and electronic signature, makes the workload more manageable.
  • Organizing Payments and Managing Bank Reconciliation – The right software will automatically distribute payments received from customers to their relevant lenders.
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For any new business, looking for software specifically designed for your sector will greatly facilitate your work and reduce the stress associated with administrative tasks.

Debt management companies will also need to perform a thorough background check to understand a customer's credit and wire transfer history. Having the ability to easily retrieve a customer's banking transactions electronically is very helpful.

As such, a credit reporting service specifically for those working in the debt industry was created in a partnership between Logican and Experian. These unique reports allow businesses to access a specific credit history.

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<img class="aligncenter size-full wp-image-39652" src="" alt=" Debt Management Client Meeting "width =" 810 "height =" 540 "/>

Take Away Sale

If you want to start a debt management business, you will have to be ready. But, more than that, you must also appreciate the sensitive nature of the debt. Customers may not always be on the lookout for information and debt processing can be an emotionally charged experience. If you are ready to handle this and adhere to the correct guidelines, you should consider working in the debt industry.