Starting a repo business is a rewarding venture that blends investigative skills and a calm demeanor with sharp business savvy. The industry represents a multi-billion dollar market, with steady demand for recovery services from banks, credit unions, and auto finance companies.
This guide will take you through the practical steps of obtaining the necessary licenses, securing funding, acquiring the right equipment, and building your client base to help you launch a successful repo business in the U.S.
Step 1: Create your business plan and validate the market
Understand local demand
Start by researching your local market to confirm there is enough business. You can call the collections departments of 5-10 local credit unions and small auto lenders. Ask if they are satisfied with their current recovery agents or if they are open to working with new ones.
Analyze your competition
A quick search on Google Maps will show you the repo companies in your target area. Look at their websites and online reviews. This can reveal opportunities, such as a need for agents who handle heavy equipment or operate 24/7, that you could fill.
Estimate your startup costs
Your initial investment will be significant, so a detailed budget is important. A reliable used tow truck can cost between $30,000 and $80,000. Proper insurance is another large expense, with annual premiums often ranging from $8,000 to $20,000.
A frequent misstep is underestimating insurance needs. Lenders require specific coverage like wrongful repossession and on-hook policies, not just a standard commercial auto plan. Also, budget $2,500 to $8,000 for state licensing, bonds, business registration, and initial marketing efforts.
Here are 3 immediate steps to take:
- Call five local credit unions to gauge demand for new agents.
- Identify three competitors in your area and review their services.
- Request quotes from at least two insurance agents who specialize in repossession coverage.
Step 2: Set up your legal structure and get licensed
First, choose a business structure. Most repo agents form a Limited Liability Company (LLC) to protect personal assets from business debts and lawsuits. You will also need an Employer Identification Number (EIN) from the IRS, which is free and available online.
An S-Corporation is another option with potential tax benefits, but it requires more formal meetings and record-keeping. For most new operators, the simplicity and protection of an LLC make it the better starting point. You can file the paperwork with your state's Secretary of State.
State licensing and compliance
Once your business entity is registered, you must get licensed. Requirements vary widely by state. For example, Florida issues licenses through its Department of Agriculture and Consumer Services, while California uses the Bureau of Security and Investigative Services (BSIS).
Application fees typically range from $500 to $2,000, and processing can take 60 to 90 days. Many new agents stumble by not fully understanding local laws. You must know your state's "Breach of the Peace" statutes, as violations can lead to lawsuits and license revocation.
The federal Consumer Financial Protection Bureau (CFPB) also sets rules that govern how you interact with consumers. Familiarize yourself with their guidelines on fair debt collection practices to ensure you operate within legal boundaries from day one.
Here are 4 immediate steps to take:
- File for an LLC with your Secretary of State.
- Apply for a free Employer Identification Number (EIN) on the IRS website.
- Identify your state's repossession licensing agency and download the application.
- Read your state's "Breach of the Peace" statutes to understand your legal limits.
Step 3: Secure your insurance and manage risk
Key insurance policies for your repo business
You will need a specific bundle of insurance policies. This includes general liability, commercial auto, and workers' compensation if you hire employees. More importantly, lenders require proof of on-hook coverage and wrongful repossession insurance before they will work with you.
Many new agents make the mistake of buying a standard commercial auto policy. This is not enough. Lenders will reject it because it lacks the specific protections for the vehicles you recover. You must have dedicated on-hook and wrongful repossession riders.
With that in mind, expect to carry at least $1 million in liability coverage. A policy with $100,000 in on-hook coverage is a typical minimum. A complete insurance package can have annual premiums between $8,000 and $20,000, so it is a significant part of your budget.
You might want to get quotes from providers like Harding Brooks, ATIG, or Recovery First Insurance. These firms specialize in the repossession industry. They understand the unique risks and can ensure your policy meets lender requirements from the start.
Here are 3 immediate steps to take:
- Request quotes from at least two insurance agents who specialize in repossession coverage.
- Confirm your policy includes both on-hook and wrongful repossession insurance.
- Ask for a certificate of insurance you can provide to potential lender clients.
Step 4: Find a location and buy your equipment
You need a secure storage lot. Look for properties zoned for commercial or industrial use. A starting size of 5,000 to 10,000 square feet provides enough space for a few recovered vehicles and your truck. High fencing and good lighting are non-negotiable for security.
When you negotiate a lease, you might want to ask for a shorter term, like one or two years. This gives you flexibility to move to a larger or better-located lot as your business grows without a long-term commitment tying you down.
Key equipment for your operation
Your tow truck is your main asset. A reliable used self-loader or wheel-lift truck is ideal for quick, damage-free recoveries. While a cheaper truck seems tempting, frequent breakdowns can cost you contracts. It is better to invest in a reliable model from the start.
You will also need other gear. A set of GoJaks, which cost around $1,500, lets you move cars in tight spaces. A professional lockout kit runs about $100 to $300. Also, get heavy-duty flashlights and a tablet for managing assignments on the road.
Here are 3 immediate steps to take:
- Identify three potential lots with the correct commercial or industrial zoning.
- Get quotes for a used self-loader tow truck from reputable dealers.
- Create a shopping list for auxiliary gear like GoJaks and a lockout kit.
Step 5: Set up your payment system
Lenders typically pay via ACH transfer or check on net-30 or net-60 terms. You will need a business bank account to receive these funds. Your main income will come from these client contracts, so get your banking details ready for invoices.
However, you also need a way to accept payments from debtors. This is common when they redeem personal property left in a repossessed vehicle. You cannot always rely on them bringing cash, and not having a card option can delay the process.
Accepting on-the-go payments
For repo businesses that need to accept payments on-site or on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit and digital wallets directly through your smartphone - just tap and done.
At just 1.99% per transaction with no hidden costs or extra hardware needed, it's particularly useful for collecting storage or personal property fees at your lot. In contrast, other payment providers often have average commission rates between 2.5% and 3.5%.
- Get Started: Download JIM app for iOS
- Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone
- Access Funds: Your money is available right on your JIM card as soon as the sale is done - no waiting for bank transfers
Here are 3 immediate steps to take:
- Open a business bank account to receive lender payments.
- Download the JIM app to prepare for on-site payments.
- Draft a clear fee schedule for personal property redemption.
Step 6: Fund your business and manage finances
Securing funds often involves two paths: an SBA loan for overall startup costs or equipment financing specifically for your truck. For an SBA 7(a) loan, lenders look for a credit score above 680 and a 10-20% down payment. Interest rates typically fall between 7% and 10%.
Equipment financing is often faster. Companies that specialize in commercial vehicles may approve loans up to $80,000 with just a strong business plan and a quote for the truck. This route focuses solely on the asset, making it a straightforward option for your biggest purchase.
Plan your working capital
You will need cash reserves for the first six months. Lenders pay on net-30 or net-60 terms, so you will not see income immediately. A mistake many new operators make is running out of cash while waiting for those first invoices to clear.
Budget for at least $15,000 to $30,000 in working capital. This should cover your first six months of insurance premiums ($4,000-$10,000), fuel ($3,000-$6,000), lot lease payments ($3,000-$9,000), and initial marketing efforts ($1,000-$2,000).
Here are 4 immediate steps to take:
- Contact an SBA-preferred lender to discuss a 7(a) loan application.
- Request quotes from two equipment financing companies for your target tow truck.
- Calculate your 6-month operating budget to determine your working capital needs.
- Set up a separate business savings account for your cash reserves.
Step 7: Hire your team and set up operations
Build your recovery team
Your first hire will likely be a recovery agent. You can structure their pay with a commission of 25-35% per vehicle, or offer a base salary between $40,000 and $60,000 plus a smaller commission. This gives them a direct incentive to perform.
You might want to seek out agents with a CARS (Certified Asset Recovery Specialist) certification, as lenders often prefer them. A common misstep is to hire without a thorough background check. One bad agent can quickly damage your reputation with clients.
As your business grows, an office manager can handle client communication and dispatch jobs. This role typically pays an annual salary of $35,000 to $50,000 and frees you up to find new contracts.
Streamline your daily operations
Do not use spreadsheets to manage assignments. Lenders expect you to use industry software like RDN (Recovery Database Network), iRepo, or Clearplan. These platforms are how you will receive and update jobs, so an account is non-negotiable.
As a solo operator, you can probably handle up to $200,000 in annual revenue. A good rule of thumb for expansion is to add one new recovery agent for every additional $100,000 to $150,000 in business. This prevents you from overstaffing too early.
Here are 4 immediate steps to take:
- Draft a job description for a recovery agent that details the pay structure.
- Research the CARS certification program for your future team.
- Request demos from RDN and Clearplan to compare their features.
- Set a first-year revenue target to help plan your hiring timeline.
Step 8: Market your business and get clients
Build direct lender relationships
Focus your initial efforts on local credit unions and smaller auto lenders. These direct relationships offer better profit margins than national contracts. Create a target list of 20-30 institutions in your service area and start making calls to their collections departments.
When you connect, have a professional capabilities sheet ready. This one-page document should outline your insurance coverage, lot security, and compliance knowledge. It shows you are serious and prepared to handle their assignments safely and legally.
Work with national forwarding companies
You can also sign up with national forwarding companies like PAR North America or Primeritus. They act as middlemen, distributing assignments from large, national banks. This can provide a steady volume of work, especially when you are new.
A mistake many new operators make is relying solely on these companies. The fees are lower and competition is high. Use them to supplement your income, but always prioritize building your own direct client base for long-term stability.
Establish a professional online presence
Lenders will search for your business online before they give you a contract. A simple, clean website that lists your services, service area, and contact information is a must. It serves as your digital storefront and builds immediate credibility.
Here are 4 immediate steps to take:
- Create a target list of 20 local credit unions and auto lenders.
- Draft a one-page capabilities sheet detailing your insurance and security.
- Register as a vendor with one national forwarding company like PAR North America.
- Set up a basic, professional website with your contact information.
Step 9: Set your pricing and fee structure
Standard repossession fees
Most of your income will come from a flat fee per recovery. For a standard vehicle repossession, this fee typically ranges from $275 to $450. Your price should reflect your area's market rate and the difficulty of the job. Involuntary recoveries often command a higher price.
It is tempting to set your prices low to attract your first clients. This approach can backfire, leaving you with unprofitable contracts. Instead, price yourself competitively based on the value and professionalism you provide, not just to be the cheapest option available.
Ancillary service fees
You can also charge for additional services. A daily storage fee of $25 to $50 is common after an initial 24-48 hour grace period. Other billable items include making keys ($100-$300), cleaning out personal property ($50-$100), and transporting the vehicle to an auction.
Create a detailed fee schedule and provide it to clients upfront. This transparency prevents disputes over invoices. Without a clear list, you risk clients pushing back on charges they did not expect, which can delay your payment and damage the relationship.
Here are 4 immediate steps to take:
- Research the going rate for repossessions in your city.
- Create a detailed fee schedule for ancillary services like storage and key cutting.
- Set your base flat fee for a standard, non-confrontational recovery.
- Decide on your daily storage fee and any grace period you will offer.
Step 10: Maintain quality and scale your operations
Set your quality standards
To keep clients happy, you can track key performance metrics. Aim for a damage-free recovery rate above 99% and an average time-to-recover under 72 hours. These numbers show lenders you are efficient and professional.
You might also want to get your entire team CARS certified. This certification is a widely recognized benchmark for quality and compliance in the industry. It demonstrates a commitment to professional standards that lenders value.
Know when to grow
A good rule of thumb is to add a new recovery agent for every $100,000 to $150,000 in new annual revenue. Some operators make the mistake of hiring a new agent or buying a second truck before they have the contracts to support the expense.
A more measured approach is to secure the new business first. Once you have consistent work that exceeds your current capacity, you can confidently invest in expansion. This prevents you from taking on overhead you cannot afford.
As your team grows, your software becomes even more important. Platforms like RDN or Clearplan have features to manage multiple agents, track performance against your metrics, and generate reports for your clients.
Here are 4 immediate steps to take:
- Track your damage-free recovery rate for the next 30 days.
- Set a revenue goal that will trigger your next agent hire.
- Explore the reporting features in your management software to monitor team performance.
- Look into the CARS certification program for your team.
You have the steps to launch your repo business. Remember that success in this field balances tough fieldwork with sharp client management. Your reputation for professionalism is your greatest asset. With a solid plan in place, you are ready to get started.
Part of that professionalism includes simple operations, like how you get paid. JIM turns your smartphone into a card reader, so you can accept payments easily with a flat 1.99% fee and no extra hardware. Download JIM to be prepared from day one.
