Many elements impact the value of accounts receivable portfolios. When evaluating a portfolio to determine its worth, careful analysis of targeted factors helps buyers ensure appropriate value determination. In this article, we will discuss 5 of the key factors that should be considered when assessing a portfolio for purchase.
- Age of the Accounts- Debt buyers carefully evaluate the age of accounts and the historical treatment of the accounts as a key factor to determining the value of a debt portfolio. Understanding how much time remains in statute of limitations and what collection efforts have already been tried on the accounts has a strong correlation to the portfolios future value.
- Location of the Accounts- With regulations varying in each state, it is important to know the location of accounts within the portfolio. Rules and regulations vary from state to state and those rules may affect the statute of limitations, garnishment efforts, and other enforcement options. Understanding the geographic breakdown of the accounts in a receivable’s portfolio is an important criterion for predicting account value.
- Original Account Type – The type of account a debt was originated as has a direct effect on the value of the accounts. Auto loans, mortgages, credit cards, and consumer loans all have different values based on the historic probability of recovering funds. Reviewing the type of account, the originating creditor and underwriting standard used to issue the account.
- Amount and quality of documentation- Documentation is one of the most important aspects of determining portfolio value. A complete, clear, and well-maintained chain of title is essential. Other important account documentation varies based on the original account type but may include original credit applications, account statements, affidavits, deficiency letters, and other documentation that may be needed to validate account balances.
- Work history of the accounts- Just as important as all the other factors, work history of the accounts impacts value. The further down the waterfall an account proceeds, the more difficult it can be to recover. These accounts often require more time and resources as they progress through stages of recovery. However, some collection agencies specialize in recovery at different stages of the collections lifecycle.
The ingredients to long-term successful debt sales strategy can vary, but two things remain constant: the need for complete compliance and the need to safeguard data. Even small changes in the variations between portfolios can exert an influence that has a large impact on value. Decisions to buy and sell should only be made after careful consideration.
If your company would like more information on debt sales and portfolio servicing, visit National Debt Holdings. Our team offers creditors a no-obligation portfolio review and valuation to help understand options for debt sales and portfolio servicing. The experienced and knowledgeable National Debt Holdings team will review accounts, stratify portfolio data, review documents, and conduct due diligence on the portfolio to compile a report that outlines the suggested sale or recovery strategy and provides expectations for liquidating the accounts. Our portfolio review provides creditors with context to their discussions about selling portfolios or placing accounts with agencies and law firms for servicing.
About National Debt Holdings
National Debt Holdings is a receivables management firm assisting creditors with improving cash flow performance from account portfolios. Our team understands the precise balance needed to successfully recover accounts receivable while protecting the brands and reputations of our creditor partners. National Debt Holdings is headquartered in Miami, FL.