Warning Signs That Your Bail Business Might Fail

Warning Signs That Your Bail Business Might Fail
02 Dec 2014

Warning Signs

Warning Signs That Your Bail Business Might Fail

 

Why do some bail agents cut corners or fail to complete the due diligence process, knowing that they are taking a risk? It’s not unusual to be juggling several cases at one time, so from time-to-time you might skip a step, even without intention. But it’s a proven fact that skipping even one step in the process can, and most likely will, come back to haunt you. If it happens too often, you can be sure that your bail business will fail. To avoid this from happening, let’s look more closely at the warning signs that can occur so you don’t take these risky shortcuts.

Incomplete Paperwork

 

All legal- and government-related professions require an abundance of paperwork and the bail industry is no exception. With each bond you write you have papers that need to be filed with the court, as well as the surety company. You are also required to keep records of the transaction, along with a file containing important documents like deeds of trust on property, bail agreements, applications, disclosures, receipts, and any other related documents. With all this related paperwork, it’s not unusual for something to slip through the cracks, or to look for ways to streamline the process.

For each new client, you should ask yourself, ‘what’s the worst thing that could happen to you if this client forfeited his bond.’ If the answer is that you would probably have to pay the forfeited bond, because you don’t have sufficient information to track the defendant down or sufficient collateral to cover the forfeit –then you need to improve your due diligence process and practices. The risk is much too great.

Shortcuts

 

It takes only one bad bond to put you out of business. When you take shortcuts in the due diligence process, this could be the end result – loss of your business. I’m sure this would not be what you would want after working so hard to get started.

Seasoned bail agents may rely on their instincts and extensive experience to decide what information they absolutely need to write a bond, but when you’re just starting out in the business you should always go through the entire due diligence process, because the moment you decide not to research something completely or require substantial collateral when uncertain about your client, you will surely risk the loss of your business. Even when defendants seem sincere or co-singers seem reliable, you must proceed with caution since your business and reputation is on the line. Trust no one and rely on your research to protect yourself.

Another scenario that can cause you to use shortcuts is when you find yourself inundated with new clients and you’re tempted to write bail for every one of them. Typically, this could happen when your business is overextended, you have too much overhead and you focus on writing as much bail as possible to add to your cash flow. However, this is exactly the situation that gets new bail agents into trouble. Because of this, I cannot stress enough the importance of completing your due diligence.

Avoid Unnecessary Liability

 

Collateral could mean the difference between covering a forfeited bond and going out of business. Unfortunately, the value of the collateral you require is only as good as the due diligence you perform. When accepting collateral, you MUST research it to the nth degree to be sure that if you end up with a forfeited bond, you will have enough collateral to cover the bond. This is why you ask for collateral in the first place. Don’t shortcut yourself.

Too Many Accounts Receivable

 

Often bail agents looking to remain competitive will offer payment plans to make the bail process premium more affordable, especially with larger bonds…$100,000 or more. The downside to offering a payment plan is the risk that you may never get paid at all. With a $10,000 premium, it would be bad enough if you had to cover a $100,000 forfeited bond. But if you received a partial payment of only $3,500, and the client skips bail, and this happens multiple times, you will find it is impossible to run a successful business.

Payment plans should be reserved for a select few, after doing some serious due diligence. But, if you start a practice of accepting all premiums on payment plans, you will have too many ‘accounts receivable’ and thus too much liability. And, it can only get worse when you combine payment plans with shortcuts on due diligence. You’ll end up with too many open receivable files and little information to track down payments and the defendant. Plus, you’ll increase your paperwork.

The moral of this scenario is not to take shortcuts and protect yourself and your business.

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