Is It Difficult to Start a Debt Management Firm?

Starting any business is challenging. You need to be driven and enthusiastic about your product or service in order to succeed. But even with determination and a solid business plan, it can be difficult. Astonishingly, in the UK, one in four businesses fail within the first five years.

Poor cash flow is a major problem for businesses. A US study revealed that this is the primary reason that 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 biggest services and products we have today.

Specialist from a debt management firm consulting a client

Unless you can identify a gap in the market, starting a business in a well-established industry is a good idea — if you have the right qualities and qualifications to offer. However, this still comes with its challenges and is especially true for those wishing to work in the debt management sector.

In the UK, both individual and company insolvencies are increasing. The worrying levels of debt mean more people are turning to debt management solutions such as IVAs and debt management plans.

There is a need for regulated debt advisors and firms to help people manage their debt. But launching a business that needs to be regulated by the Financial Conduct Authority (FCA) requires a great deal of work.

Anybody wishing to enter this market will need to do comprehensive research and be willing to adhere to the best practices and regulations set down by the FCA. Below, we explain how this can be done and what is required.

Complying with Financial Conduct Authority Guidelines

The Financial Conduct Authority (FCA) regulates nearly 60,000 financial services in the UK. Its aim is to ensure that financial businesses work in a fair way which benefits consumers.

In 2014, the FCA took over the regulation of debt management companies. During this time, many debt firms went out of business. Those that went out of business were not working in the best interests of the consumer and were swindling those in debt out of even more money.

Now, all companies must be registered with the FCA and demonstrate how they are adhering to guidelines. These guidelines cover a variety of topics, including marketing and service charges.

If you wish to start a debt management firm, you must first familiarise yourself with the regulations so that you’ll be able to apply them to your new business. All debt firms must also be PSD2 compliant. For further guidance on what you will need to do before applying, refer to the FCA checklist.

Debt management specialist using software

Get the Best Debt Management Software

As well as knowing the guidelines and becoming a regulated company, there are other essentials that you need to start a successful debt management firm.

Companies dealing with clients in debt will need to obtain a lot of information. Once your client begins to pay off their debt, it becomes essential for you to monitor repayments and keep accurate records.

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

  • Adhere to GDPR guidelines — GDPR regulations mean that businesses need to be more aware than ever before about where personal data is stored and who has access to it.
  • Be flexible to your needs — The ability to personalise the system without having to wait for additional software development is essential. It means each business can create a process workflow which is quick and easy to use.
  • Record accurate information which is easily accessible — With the sheer amount of data that needs to be stored and the high number of clients that a firm may be dealing with at any given time, keeping all data up-to-date and correct is vital.
  • Find the best solution for the client — Software should be able to generate a Standard Financial Statement (SFS) which can indicate areas of overspending by clients. By obtaining this information, debt firms can analyse this to discover which debt management solution is best for their client.
  • Ease communication with clients and creditors — Automated correspondence such as printed documents, SMS, email and e-signature make the workload more manageable.
  • Organise payments and handle bank reconciliation — The right software will automatically distribute payments received from clients to their relevant lenders.

For any new business, finding software which is designed specifically for your industry will make your workload much easier and reduce the stress associated with administrative tasks.

Debt firms will also need to do a comprehensive background check to understand a client’s credit and bank transfer history. Having the facility to easily retrieve a client’s bank account transactions electronically is very useful.

As such, a credit report service specifically for those working in the debt industry has been created in a partnership between Logican and Experian. These unique reports enable businesses to access accurate credit history.

Debt management client meeting


If you want to start a debt management firm, you will need to be prepared. But, more than that, you must also appreciate the sensitive nature of debt. Clients may not always be forthcoming with information and dealing with debt can be an emotionally-charged experience. If you are prepared to handle this and adhere to the correct guidelines, you should consider working in the debt industry.