People new to the industry, both brokers and companies thinking about using factoring services, have an uncanny ability of making things more difficult than need be.

Terms like “hold back,” “reserves,” “advance rate,” and “points” can put people on edge.

Add to the fact that just about everyone tries to compare “factoring vs. bank loans” and it is no wonder many people leave the table confused.

The reason I bring this up is that many times a factoring broker will talk about items or “terms” that the prospective client has yet to bring up. Why over complicate the issue?

In the end, you have one focus as a factoring broker… help the client get money!

This should be the primary focus during any conversations.

One of the client’s best options to get money is by selling existing invoices. This comes with numerous advantages. Here are just a couple:

1. Factoring is not a loan. Therefor the prospective client is not incurring debt (or paying interest on that debt).

2. The client also has the flexibility to sell as many (or as few) invoices as they want.

3. The client is typically free to spend the money however they see fit (not managed by a bank administrator looking for more assets to leverage).

There is no doubt that many other variables come in to play – especially when it comes to due diligence. But much of that will be handled by the Factoring Company (investor, factor, or funder) – so stick to what you need most – signing up new clients.

So, in the end (or should I say the “beginning”) don’t over complicate discussions. Keep your focus on helping the client (i.e.: getting them money to help fund and grow their business) and the rest of the details will fall in place.

Sooner or later, your efforts are going to turn to the Internet to find ways to leverage new clients.

In the beginning you will be faced with two big options…FACEBOOK® or GOOGLE+1™.

There seems to be a lot of confusion out there on whether your business should be using Facebook or Google+1 as a way to bolster up some marketing efforts.

Although both Facebook and Google+1 should have a place in your efforts (you don’t have to pick just one), most likely, one outshines the other as a good fit.

Here are a couple things to pay attention to when marketing your factoring company online.

If you are looking for interaction, you want Facebook.

But this assumes TRUE interaction. In other words, just because you have 3000 Facebook fans doesn’t mean they are reading anything you are putting up.

Are they leaving comments?

Are they sharing your posts?

If they are leaving comments, hitting the “like” button, and interacting, Facebook may be well suited for you. You just need to find a way to convert them to clients. If there is not a lot of interaction, you may just be wasting your time.

Fans work well when the “page” is a product or celebrity – not so much a company. A “company” is just too broad.

For example, how many raving fans would there be if I had a fan page on “Farms?” I am sure I would have some. Now, how many fans would I have if my page were the subject of “bacon.” – lots I imagine (who doesn’t like bacon) – and it is way more targeted.

The other downside on Facebook is that your efforts are limited to your ability to keep the content coming – and it won’t, for the most part, help you in the search rankings.

So, if you have interaction, go with Facebook. Otherwise think of Google+1.

Are you looking for “hands off” marketing?

Google+1 has two big advantages over Facebook when it comes to increasing your Internet exposure (and hopefully factoring business).

One, it does not require an ongoing amount of content from you. If people click the “+1” button their additional “circles” will be in on the action. It doesn’t require more content from you or more people “sharing” like Facebook.

Secondly, that little plus button can help you in the search rankings. Although Google does not formally release all the ins and outs behind their programming, one thing is clear: the more people “+1” your site, the higher up you may get in the search rankings.

As popular as Facebook is, it has yet to make a big “business” impact. Many Fan Pages are dead on arrival and do nothing for actual business.

Google +1 seems more in the thick of it when it comes to business. If someone is searching for your company the +1 can give you some extra credibility (Facebook can’t really help you there).

(Note: FACEBOOK is a registered trademark of Facebook, Inc. and GOOGLE is a registered trademark of Google Inc. This article was written based on research and professional experience.  This author, company, and website are not endorsed by or affiliated with either FACEBOOK, Inc. or GOOGLE Inc).

So, who is right for your factoring business?

As we mentioned in the beginning, we really thing you need to keep both on your radar…but for now, we give the edge to Google +1 if you are talking about getting more business.

Facebook is personal. But until users can separate business from personal on Facebook (as in two separate accounts) the business side just seems to be an after thought.

With costs going up, consumers were going to have to pay more -  painting a potentially gloomy picture for holiday spending. But did this actually happen and what about the cost of factoring during this period?

(8/31/11 Source: Apparel) – A new survey of consumer goods manufacturers and importers shows that the dual trends of weak inventory sales and rising prices paint a dark picture for the upcoming holiday season. As of July 31, 2011, during which time most holiday orders are placed:

• 83 percent expect prices of consumer goods to rise this holiday season, with one-third saying prices could rise as much as 10-15 percent
• To deal with the rising cost of goods and the gloomy economic outlook, 89.4 percent expect retailers to rely heavily on discounting to move merchandise
• 64 percent of manufacturers and importers reported that retail orders are the same, or less, as compared to last year (2010)
• 30 percent of respondents reported that the increased costs to manufacture and ship goods will be passed along to consumers as compared to only 20 percent of respondents passing increased costs along to the consumer six months ago

“Inflation is coming and the era when retailers and manufacturers absorb price increases to protect consumers is over. Our manufacturing clients are telling us that prices for clothing, bedding and other soft goods will rise this holiday season. However, all hope is not lost, as one-third of those surveyed believe that despite current market challenges, retailers will increase inventories this holiday season,” said Andrew Tananbaum, executive chairman of Capital Business Credit.

Additional findings of note:

• Nearly three-fourths (73 percent) of respondents expect sales this holiday season to be the same, or weaker, than last year
• 60.5 percent believe that an increase in the cost of goods will be spread across  consumers, retailers and importers
• Half (53 percent) cited that due to the increase in raw materials and logistics costs, retailers are asking for longer payment terms during the holidays indicating that suppliers are forced to become more flexible with respect to payments and contract terms

These changes will affect margins across the board, as an overwhelming 95 percent of respondents indicated that their margins would be affected in some way.

The Global Retail Manufacturers and Importers Survey, conducted by Capital Business Credit LLC (CBC) (www.capitalbusinesscredit.com), a global integrated financial products and services company that serves the retail sector, surveyed 80 manufacturers and importers in the apparel, housewares, home furnishings, fashion accessories and furniture industries, who manufacture some, if not all, of their products in China, India, Vietnam, Bangladesh and Pakistan. The survey was conducted the week of Aug. 1, 2011.

Cotton

Almost all (95 percent) of respondents saw an increase in the cost of raw materials over the last 12 months. To combat the increased cost of raw materials, 33 percent will be replacing some of the cotton content in their products with rayon (60 percent) or Lycra (40 percent). More than a quarter (26.7 percent) of those who have high-cotton content products will vary the cut or design of their products to use fewer raw materials. Respondents also noted that cotton prices will directly affect consumer prices this holiday season.

Labor

Approximately 44 percent of survey respondents plan to move some or all of their manufacturing out of China due to the increased cost of labor. Almost three-fourths (71.4 percent) of those respondents are considering relocating some of their production to Vietnam.

Logistics

The CBC survey also identified that the increased cost of logistics – due in large part to the rising cost of oil – is a major cost concern (92.2 percent) for importers and manufacturers. Almost two-thirds (66 percent) of respondents said that logistics costs have increased by more than five percent in the last 12 months with nearly 58.3 percent of respondents citing an increase of five percent or more due to the current cost of oil.

“The rising costs of raw materials, labor and logistics only magnifies the existing problems facing manufacturers, importers and retailers. On a bright note, looking forward to the Spring season, we anticipate prices to decrease at retail, due to forward looking data on the decline in cotton prices,” said Tananbaum.

The good news is that consumer shopping on Black Friday last week surpassed all records with sales up over 6% (Source MSN.com).

So even if there was a slight increase in production cost (that may not have been passed on to the consumer) the volume should make up for any factoring costs incurred by companies selling invoices.

In the end, consumers were sick and tired of staying on the sidelines (spending wise) and this gave business a good hit at the end of 2011.

Are we getting too impersonal when it comes to making offers or negotiation?

Despite the technological advances over the years the rules of negotiation have not changed. They have a set of “best practices” that the conveniences of technology can derail.

So, can you negotiate Factoring deals online?

To answer, let’s look at three basic negotiation techniques (that apply to factoring and business in general):

1. It must be personal.

Well, despite your ongoing political debates with friends and the numerous jokes being passed around by co-workers, email is anything but personal. Here’s a hint, when the proposal is being sent to BullDOG345@wherever.com, you are already losing the deal.

2. It must allow for interaction.

Don’t mistake emails going back and forth as meaningful interaction. Although the English language is powerful in the hands of a gifted writer, all bets are off when it comes to sending emails back and forth. There is no room for error when it comes to interpretation. Sarcasm, humor, and a host of other real-life emotions not only get lost, they get abused.

3. Sharing becomes easy.

This one is relatively new, but if you are up against someone else, expect your offer to be immediately forwarded to several of your competitors. I am going to guess you didn’t want them in on your best offer letter if you could help it. It also gives the competition to “one-up” your deal out of context. That is not to suggest that you don’t put an offer in writing but a potential client is far less apt to fax on your offer versus just hit “forward” on the email.

Email is a great “foot in the door” vehicle – at most. People want to do business with people, not computers. I receive numerous business proposals on an almost daily basis. Although I like them from a screening process, I would never continue ongoing communication from someone online. Sometimes you just need to get on the phone or meet face to face.

Modern technology can help us cut numerous corners, but the subtlety and importance of the negotiation process is just not one of them.

So, what do you think?  Should a factoring broker or factoring company use email to make and negotiate offers?  Tell us what you think in the comments below!

For example let us say that you are only making a 3% profit on your product and the factoring fee is also 3%.Immediately one might think there is no room to work with but the next fundamental question is, “Could you increase your business (make it up in volume) if you had cash available through factoring?”

For some companies, particularly those with low margins, it is an opportunity to double volume. Consider this example:

Without Factoring

• Monthly Gross Sales – $100,000
• Cost of Goods Sold – $60,000 (60%)
• Gross Profit – $40,000 (40%)
• Fixed Expenses – $20,000
• Variable Expenses – $17,000 (17%)
• Monthly Net Profit – $3,000 (3%)

The above scenario has no factoring fee and yields a 3% profit at the end of the month. But remember, items like “fixed expenses” are constant regardless of volume. This means if by having cash available you can book more business the cost of production does not go up exponentially. Now consider the same example with factoring assuming you only double your business.

With Factoring

• Monthly Gross Sales – $200,000
• Cost of Goods Sold – $120,000 (60%)
• Gross Profit – $80,000 (40%)
• Fixed Expenses – $20,000
• Variable Expenses – $34,000 (17%)
• Factoring Fee – $6,000 (3%)
• Monthly Net Profit – $20,000 (10%)

In addition to increased profit there is also a benefit in relation to your “cost of goods.” Many companies with good cash flow can take advantage of discounts afforded by vendors; thereby lowering your cost of goods by as much as 3-7%. If, in the above example you were able to pay COD for your cost of goods, and get a discount of 5%, you would realize another $6,000 (3%) to the bottom line.

By increasing volume and ability, many companies with smaller profit margins are able to take advantage of large company strategies utilizing factoring. In the end this can result in significant improvements to the bottom line making factoring account receivables a viable option to companies with large or small profit margins!

The “Dilemma”

The exchange started with a simple post from a factoring broker that had a “dilemma” with a new soon-to-be client.

In going over the client’s information, the consultant discovered that the client really did not need factoring help. He had two other alternatives that were clearly better choices for the client , with no additional risk.

The consultant was concerned how he was going to keep is his client focused on factoring so he could get the deal. “Any feedback would be helpful.”

Enter the “Expert”

The post was almost immediately replied to by a so-called “industry expert” that had been involved with similar negotiations (all going his way of course).

His advice bordered between “bait and switch” and “smoke and mirrors.”

Seriously?

In the ongoing posts back and forth neither of them ever considered actually telling the client that there were better options available.

What? Risk losing the deal in exchange for taking the professional higher ground?

Yes, and here is why…

1. The client is going to find out anyway. When they do, you are going to look like either an idiot or a thief. Ok, maybe those sound a bit harsh, but you will probably be viewed somewhere in the not so favorable middle.

2. They have friends to send you. Your “missed opportunity” with this client could come back ten-fold if you actually help your client. Trust me, he is going to tell every one of his colleagues about you. You saved the day, even if it didn’t involve invoice factoring. Who do you think his friends are going to call?

3. They have friends to steer away from you. Same as the last point, but in a bad turn of reversal. Remember, he will find out what happened, and will be sure to tell his friends if he thinks you purposely didn’t help him in order to make a few bucks.

Look, the rule of thumb is simple…

Always do the right thing.

Help your client in any way, shape, or form that you can. If it involves factoring receivables and you get a commission on the deal – that’s great!

If it doesn’t, but you are still able to help, just consider that you put some future business on lay away – maybe it will show up just in time for the holidays!

All Done!

In a few short minutes you will be receiving (via email) your very own copy of The Factoring Hot List.

You are also part of the Factoring Investor ‘inner circle.”   This entitles you to receive free weekly updates on what is going on in the factoring industry including special funder interviews and real world strategies to help you excel in the cash flow business.

Until then, check out the FactoringInvestor.com site and be sure to visit a few of our sponsors that make this possible.

If you have any questions, or would like to know more about a particular topic, don’t hesitate to contact us.

We look forward to working with you!

All the best,

Fred and Tracy Rewey, FactoringInvestor.com

How will they be treated? What if they pay me directly? What do I tell them? Here are some common questions and helpful answers.

I don’t want to sell all my invoices. Is that possible?

Yes. Most factoring companies will allow you to pick and choose which invoices to factor. Of course they must be ‘credit worthy” but the factor will help you decide which ones are in your best interest to sell.

Where do the payments get sent?

Your customers will mail payments directly to the factoring company. Any ‘reserve” will then be forwarded on to you.

What if the customer mails me the money?

This is common, especially on the first payment. Factoring companies will require you to forward them the check. In other words, you are not to cash it and write another check to the funder. This helps the factor keep track of each customer’s credit worthiness (as well as avoid fraud). Your clients will then be notified that they need to mail payments directly to the factor.

How do I know the factor will treat my clients well?

The factor is in business with you. They want you to succeed and continue to grow. They are not a collection company. They want to maintain your customer satisfaction just as you would.

What should I tell my customer? Will it look bad if I am factoring?

Odds are your client may already be familiar with the process and not really think anything of it. If for some reason they are not, you simply need to tell them that you have chosen to use an outside company to manage your account receivables.

Still looking for more information? Check out 5 Things to Know Before Applying for Factoring.

In the past, financial relationships were largely with your own personal banker. Nowadays, your car loan may be from a completely different financial institution than your home loan, business credit line, or credit cards.

The reason being is that, with competition, you are able to get specialized service and better pricing.

For the most part, Bank Factoring and a Factoring Company will have similar pricing, but price is not your only consideration.

A full-service factoring company comes out on top when you think of what additional benefits you receive…

Speed - Most banks are not known for their quick turn around. Factoring companies will typically fund the same day or within 24 hours. Factors use a lot less paperwork.

Credit Help – Today’s factors do more than buy your receivables. They can check out your prospective clients credit and help you avoid bad accounts.

Collection – A full service factor will supply you a collection expert. These people are good at what they do. They know how to maintain the credibility of your business, and also collect some money!

Collateral – Although banks suggest they are only interested in the receivables, they will also typically require a secured position in all your assets as security. This can be very problematic when you need additional funds and the bank has tied up your collateral. A Factor will usually only use the actual invoices as security – enabling you to continue to run your business as you see fit.

Flexibility – Face it, banks are not flexible. Today’s full service factors have to be flexible to compete with each other. They can think outside the box and most deals, unlike a bank, are not ‘pass or fail.” A factor will try to find a way to make the deal work for you.

All things considered, you are typically much better off dealing with a full-service factor than going to a bank that just happens to ‘also offer” factoring services.

For more information on improving cash flow with factoring be sure to read Unlocking the Cash in Your Company – How to Get Unlimited Funds Without a Loan!

Well, this article is for you!

What is factoring?

Factoring is the sale of accounts receivables or invoices at a slight discount.

How does it work?

You set up an account with a Factor. Once set up, you send the new invoice to the Factor who then cuts you a check for the agreed upon percentage, referred to as the advance. Read More…

How much does it cost?

The factoring fee depends on the strength and performance of the accounts. For the most part the fee will be between 2-5%. Read more…

How long does it take?

Setting up an account can take 5-10 days. Once the account is set up an advance is typically funded within 24 hours of invoice submission.

Do I have to factor all my accounts?

Not unless you are looking for a ‘one time” shot. Otherwise you pick and choose which invoices you would like to factor.

How long do I have to work with the Factor?

There is no set time. The average business may factor for 2-3 years but some companies continue on indefinitely.

What if I have poor credit?

For the most part the factor is looking at the strength of the payer (your customer), not you or your business.

What happens if my customers don’t pay?

That depends on how you set up the transaction with the Factor. If it is ‘non-recourse factoring” then you may not be responsible. If it is ‘recourse factoring” then you will need to repay or replace the bad invoice. Read More…

What if I have a bank or tax lien?

Oftentimes the factor can work with the bank or tax entity to have them subordinate their position. If there are enough receivables you may even be able to pay off the loan or tax obligation. Read More…

How can I get started?

There are numerous great factoring companies right here at FactoringInvestor.com. We recommend that you ‘interview” more than one to see which company may best fit your needs. Read More…

What if I want to learn more?

There is a lot of great information on this site. There are also many in-depth resources available from a variety of authors. Check out the ‘Resources” section of FactoringInvestor.com. Read More…