What is a debt buyer and should you sell your invoices to one?

Debt buyers purchase portfolios of aged, often charged-off receivables from banks, utilities, healthcare providers, and sometimes other businesses. After purchase, the buyer owns the full legal right to collect. They aren't collecting on behalf of the original creditor anymore. The price paid varies by age, documentation quality, type of debt, and collectibility. A portfolio of well-documented business invoices under 12 months old might sell for 10 to 15 cents on the dollar. A portfolio of heavily aged consumer debt with poor documentation might sell for 1 to 2 cents.

For most small service businesses, selling invoices to a debt buyer is not the primary collection strategy. Debt buyers typically purchase portfolios rather than individual invoices, and their pricing reflects the high risk of the aged debt they buy. The business ends up with a very small fraction of what was owed. A single $10,000 overdue invoice is unlikely to find a debt buyer willing to transact on it individually. Debt buyers work in volume.

Debt buyers become relevant when a business has decided an invoice is uncollectable, has already written it off for tax purposes, and then gets an offer from a collections agency to purchase outright rather than work on contingency. Selling removes the administrative burden and produces immediate cash, even if it's small. The decision depends on the amount, the documentation quality, and whether you have any remaining interest in the customer relationship.