While some people want to get rid of their unpaid receivables, others have turned them into a business: buying debt at a discount is one of the most profitable alternative investments when done properly.
The business model
It is simple: buy a receivable for a percentage of its face value (say 40%) and recover a larger amount — by negotiating a partial settlement with the debtor, enforcing through the courts, or waiting for their finances to improve. The difference between what you paid and what you recover, minus costs, is your return.
Example: you buy a AU$15,000 debt with a court judgment for AU$6,000. If you recover AU$12,000 through enforcement, the gross return is 100% on the capital invested.
Who buys debt in Australia?
From large funds acquiring bank portfolios to law firms buying individual receivables to enforce with their own resources, plus specialised small investors. You don't need to be a fund: many deals on debtalia are for amounts between AU$2,000 and AU$50,000.
The 4 keys to valuing a deal
- The debtor's real solvency: check trading status, assets and charges before offering.
- Documentary quality: insist on seeing invoices, contracts or the judgment before signing.
- Litigation status: is there a court judgment? Enforcement under way? Charging orders?
- Limitation: check the 6-year period under the relevant state Limitation Act and any acknowledgements that restart it.
Risks to bear in mind
The main one is obvious: not recovering your investment if the debtor is insolvent. Also: legal costs if you have to litigate, long recovery timescales, and the need for legal know-how. Diversifying across several smaller deals mitigates the risk.
How to start on debtalia
In our search of debts for sale you will find debts and portfolios listed with their amount, price, kind of debt, region and available documentation. Contact with the seller is direct and free: send your enquiry or offer from each listing and negotiate without intermediaries.
