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A buyer's bid is cash now. Placement pays later, after the agency's fee. This calculator puts both at present value and shows the bid that would tip the decision.
Enter the tranche once. You'll get the gap between the two paths in dollars, plus the break-even bid and break-even liquidation.
Free, with no form to see your result. Your numbers stay in your browser unless you email yourself the result.
$15,926Placing nets more, at present value
Worked example below: $5,000,000 face value, a 3.5 cent bid.
Compare a buyer's bid with what placement would net after fees, other costs and the wait for cash. Nothing you type leaves your browser unless you choose to send it.
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Your result
Fill in your numbers, or use the example, and your result appears here.
For reference, the Federal Trade Commission found buyers paid an average 4.0 cents per dollar of face value for portfolios bought from July 2006 to June 2009 (report published January 2013, government). No newer public price series was found, so use current bids.
Placement cash is discounted back to today with your own cost of money. The sale is counted as cash on close, less what it costs to prepare.
| Input or result | Value |
|---|---|
| What goes in | |
| Face value | $5,000,000 |
| Expected liquidation if placed | 6% |
| Contingency fee | 30% |
| Other placement costs | $20,000 |
| Months until placement cash arrives | 12 |
| Annual discount rate | 8% |
| Bid | 3.5 cents per dollar |
| Cost to prepare and close the sale | $15,000 |
| What comes out | |
| Dollars collected if placed | $300,000 |
| Contingency fees | $90,000 |
| Net from placing, before discounting | $190,000 |
| Discount factor | 0.9259 |
| Present value of placing | $175,926 |
| Sale proceeds | $175,000 |
| Net from selling | $160,000 |
| Difference | $15,926 |
| Verdict | Placing nets more |
| Break-even bid | 3.82 cents |
| Break-even liquidation | 5.51% |
Placing nets $15,926 more than selling, at present value.
With the other inputs unchanged, selling would net more only if the bid topped 3.82 cents or expected liquidation fell below 5.51%.
Press “Fill in the example” in the calculator above to load these numbers and check them.
4.0¢
Average price buyers paid per dollar of face value, portfolios bought July 2006 to June 2009
Source: Federal Trade Commission, The Structure and Practices of the Debt Buying Industry (January 2013). No newer public price series was found, so use current bids.
You can sell charged-off accounts to a debt buyer for a price per dollar of face value, or place them with a collection agency that keeps a contingency fee on what it collects. Selling pays once, at close. Placing pays over months, and you keep the accounts.
A dollar collected 12 months from now is worth less than a dollar today. The discount rate turns future placement cash into today's money, so the two paths are measured the same way.
Your own cost of money, such as your cost of funds or the hurdle rate your finance team uses. The 8% in the example is an example.
The bid at which selling and placing net the same at present value. A bid above it favors selling; a bid below it favors placing.
Anything that doesn't fit one number: how accounts are worked once they leave you, and the buyback and resale terms in the purchase agreement. Weigh those next to the result.
The Recovery Performance Diagnostic measures one portfolio or segment on your own placement and payment history: net-back after fees, complaints, disputes and legal cost, by agency and cohort. It takes about 4 weeks from the day TSI receives clean data.
Request a Recovery Performance Diagnostic
The Recovery Performance Diagnostic is free and carries no obligation. Any work after it is scoped and priced separately, and only if you choose to go ahead.
Which agency on your panel leaves you the most per dollar placed, after fees and the costs you carry.
First- and third-party collections, legal recovery and portfolio oversight.
Agency net-back, sell or place, denial economics and appeal break-even.
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