How to sell a debt to Tempest
Customer not paying? – your options
When your customers don’t pay you have several options including:
- Writing off the debt and walking away
- Engaging lawyers to commencement enforcement proceedings to collect the debt, or engaging a debt collection company to collect the debt
- Selling the debt to a debt buyer
Unpaid invoices cause a financial strain on your business; however, it is important to move forward with your business and avoid incurring additional legal fees or collection costs if the likelihood of payment is small.
Whatever option you take, its important not to spend good money on bad debts.
When Tempest buys a debt, the outstanding invoices are assigned from your Company to us, meaning we now own the debt, and it is our prerogative to collect it. We will deal with all aspects of collection including, sending demand letters, dealing with disputes raised by the customers, and commencing legal proceedings if necessary.
In our experience, customers refuse to pay for a variety of reasons including disorganisation, cashflow issues on their end, or they dispute that the amount is owed (even if there are no issues with the work).
The process to collect outstanding invoices can be time sensitive and when it gets to us often requires legal proceedings to be filed.
By selling your debt to Tempest, you free your time to move on with your business and we are left with the work and cost associated with collecting the debt itself.
What types of debt does Tempest buy
We have experience collecting debt in all industries including:
- Construction debt (including debt which is disputed)
- General freight and other commercial debt
- Consumer debt
We buy debt under the following arrangements:
- Outright purchase
- Split of proceeds after out of pockets associated with collection
In an outright purchase we will extend an offer on the face value of the debt (for example 5 to 20 cents on the dollar). The purchase price we offer depends on several factors including the supporting evidence available (i.e., invoices, emails and whether there are signed terms of trade), whether the debt is disputed, and the overall value of the debt.
It is also common for Tempest to purchase a ledger, or ‘book’ of debt. In this instance we will buy numerous invoices at a set price.
For example, we could purchase 150 invoices totalling $100,000.00 for 10 cents on the dollar, or $10,000.00.
Split of proceeds
When purchasing a debt, we may agree to buy the debt and split the proceeds of our recovery with you on an agreed basis (for example, 50/50 a 50/50 split after accounting for out-of-pocket expenses associated with collection).
For example, if we are enforcing a debt by filing a liquidation application, out of pocket expenses include High Court filing fees, process serving fees and statutory advertising.
It is important to note that if we don’t collect the debt, you won’t be required to reimburse us for out-of-pocket expenses.
The terms including the share of the recovery basis vary on a case-by-case basis (depending on the nature of the debt, whether it is disputed, the available supporting evidence, and the amount of the debt). Our standard terms are 50/50 split after accounting for out-of-pocket expenses associated with recovery.
To illustrate the above:
Tempest acquired a $10,000.00 invoice from Placeholder Construction on a 50/50 split after accounting for out-of-pocket expenses.
Tempest issued a statutory demand, followed by filing liquidation proceedings in the High Court against the customer. The customer ultimately settled the debt in full for $10,000.00.
The recovery would be split as follows:
- $10,000.00 is initially recovered
- $800.00* is deducted on account of out-of-pocket expenses
- $4,600 is paid to Placeholder Construction (being half of $9,200.00)
*These figures are for the purposes of an example only, out of pocket expenses vary on a case-by-case basis.
Benefits of selling to Tempest
By selling your debt to Tempest, you free up time to focus on your business, leaving the time and risk associated with collection to us.
You are not required to pay any further money to collect the debt, we pay all costs associated with enforcement as we now own the debt. In the event we can’t collect the debt, for example we liquidate the Company, and the liquidator does not pay a distribution, then that expense will fall on us.
If you would like to discuss the possibility of selling your debt to Tempest, please don’t hesitate to contact us at [email protected] or call us 0800 845 885.