While factoring commissions are paid in a variety or ways, there are some standards to start with.

The factoring broker will earn a percentage of the factoring company’s fee. For example…

If the invoices factored had a total balance of $50,000 the factoring company may have a fee of say $2,000.00 or 4 percent.

The broker typically receives a percentage of the factoring fee (in this case, a percentage of the $2,000).

Although the factoring broker’s percentage varies between factoring companies, 10% would likely be the minimum a broker would receive. So in this example, once the invoice has been paid, the broker would receive a commission check in the amount of $200.

It is important to note that a Factoring Investor typically honors the payment of commissions to the factoring broker on all future invoices with the same client. This can be a great source of ongoing revenue for the broker as many companies continue to factor for a considerable time frame.

As the broker brings in more business or larger clients, the broker may begin to earn a greater percentage of the factoring fee – up to 15%. Combine that with residual income and it is easy to see why so many people are interested in a career in the factoring industry.

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!

Just take a quick look at these highlights from the 2008 Asset-Based Lending and Factoring Surveys recently released by the Commercial Finance Association in June 2009 to see where opportunity is knocking in the United States.

Factoring Highlights

• Factoring experienced an annual volume of $136 billion in 2008 compared to $20.2 billion volume in 1976, the first year reported for the survey results.
• While the growth was a nominal .5% compared to 2007, it still reflects stable volume during volatile economic times.
• The major regional market for factoring continues to be the Northeast (47%) followed by the West (24%) and the Southeast (20%). The Midwest and Southwest comprised just 5% and 4% respectively of market share.
• The textile/apparel industry prevails as the primary client base for large scale factoring companies while transportation and business services contributed to much of the small factor volume.
• Non-recourse factoring makes up 77% of transactions with the remainder consisting of full or partial recourse factoring.
• Notification factoring comprised 78% of the volume with non-notification contributing the other 22%.

Asset Based Lending (ABL) Highlights

• The Asset-based lending industry reached $590 billion in 2008, an 8.3% increase over the prior year.
• The regional market allocation for ABL was more consistent across the United States but was still led by the Northeast (27%). It was followed by the Southeast (25%), the Midwest (20%), the West (16%), and the Southwest (12%).
• Just 12 states represented almost 65% of ABL outstanding loans.

The Commercial Finance Association releases this informative survey each year. Adrej Suskavcevic, the trade association CEO, shared these comments, “Businesses in need of capital should look beyond traditional bank loans and realize there are lenders that are able to help business meet their capital needs.”  To view the full press release and survey results you can visit the  Commercial Finance Association.

In face of a tightening credit market the need for alternative financing is on the rise. This is just part of the reason factoring made Yahoo’s Top Ten Jobs List for 2009. Yes, that is opportunity you hear knocking!

Now think about the state of the economy and the never ending reports on delinquencies, slow pays, and bad debt. If you are looking for the opportunity in this dismal economy…. think delinquent debt!

Sound crazy? Think it through:

• What do all businesses have in common?
• What do all businesses have whether they want it or not?
• What would all businesses love to get rid of?
• What is worth money to a business, and yet they often just throw it away?

You guessed it, delinquent debt!

The fastest way to establish credibility and begin working relationships with current or new prospects is to buy a few million dollars of delinquent debt off their books.

If you want to make money in delinquent debt then learn from the professionals. For the past ten years Larry and Marilyn Singer have been using delinquent debt to open doors that would normally have been closed.

They share their knowledge and expertise in Delinquent Debt: A Broker’s Manual. This step-by-step guide is a proven system for successfully brokering portfolios of delinquent debt for fun and profit.

FactoringInvestor.com asked Larry Singer to expand on how this system has worked so well for their business.

From Larry Singer:

When Marilyn and I first went into the cash flow business, we targeted areas with which we were familiar, mortgages, business notes and factoring. During a conversation, a prospect said that he had a lot of delinquent accounts that they were trying to clean up. Being the diligent cash flow consultant she is, Marilyn pursued the conversation and the rest is history.

For the past ten years we have used delinquent debt to open doors that would normally have been closed. Starting a conversation by telling a person that we are interested in purchasing his delinquent accounts that he has already charged off his books gets his attention very fast.

“Brokering Delinquent Debt for Fun and Profit” is the result of years of experience in the Marketing and Cash Flow Industry and is a plain language guide to help you open doors to profitable areas in the cash flow industry.

If a business has been doing business over a period of years, in all likelihood that they have accumulated a volume of delinquent debt.

Just think, if you had delinquent accounts on the books and someone called you and said they would like to buy them. Wouldn’t that conversation build credibility with you? Of course it would.

That conversation would make it easy for you to talk about factoring of accounts receivable that could possibly cut way back on future delinquencies and open conversations on equipment leasing, business notes and many other lucrative income streams.

Where there are delinquent accounts, there are performing accounts.

Where there are performing accounts, there are new opportunities for the cash flow professional.

Would you like to know:

• Where to locate profitable delinquent debt portfolios?
• Ways to find and speak to the right people?
• How to get around the gatekeeper?
• How to talk the talk?
• How to turn delinquent debt into current profits?
• How to position yourself as valuable cash flow resource?
• What information you will need to know?
• How to convert delinquent debt prospects into long term clients?
• How to open doors in all areas of the cash flow business and establish credibility?

All this and more is provided in the step-by-step system from Marilyn and Larry Singer including:

- Delinquent Debt: A Broker’s Manual (Read over 85 pages in eBook format)

- Audio Presentation (Listen to the MP3 presentation)

-  Power Point Presentation (Follow along in PDF format)

-  Scripts

- Targeted Marketing Letters

- Ready to Use Forms

- All available immediately in download format!

Click Here to Order Your Digital Copy Now for just $149

This easy to read and use program walks you through all the steps from finding delinquent debt portfolios–and they are everywhere–to brokering them.

Don’t wait another day without exploring this incredible door opening income stream.

Don’t let another prospect get way because you didn’t offer them the right solution.

Begin relationships.

Open new doors with new and current prospects.

Yes, – I want my digital copy of How to Make Good Money with Bad Debt! Sale Price: $149.00

Order your digital copy today and don’t miss another opportunity.

FactoringInvestor (FI) caught up with Howard Chernin (HC) to fill us in on the accounts receivable funding business. Howard is the Sr. Vice President of Quantum Corporate Funding, LTD in Fort Lee, New Jersey and heads up the New Business Development division.

FI: What transactions will your company consider funding?

HC: Since 1991 Quantum has been factoring all types of receivables, except medical. We continue to target transactions ranging from $25,000 to $5 million plus.   We will still buy a single invoice rather than requiring a company to sign up for a long-term contract.

We are well known for factoring construction receivables, however we will consider all types of invoices.   Right now we are seeing quite a bit of manufacturing, staffing, and construction.

We are considering deals all across the country. In fact Tobi in our office moved to Arizona and is developing business in that part of the country.   The first step is to send us some basics on the transaction, including debtor information and aging reports, to gauge our interest level.

FI: How did you get your start in the factoring business?

HC: I worked in the corporate world for several Fortune 500 companies. I wanted to do something completely different and started a fire sprinkler company in the construction field. That led to my involvement in the factoring business with Quantum in 1993.

FI: What unique benefits does your company provide?

HC: ME! I’m the biggest benefit in helping consultants work with our company to factor receivables for their clients.

FI: How do you handle commissions to brokers or consultants?

HC: Our standard commission is to pay 10% of whatever Quantum makes for the lifetime of the account.

FI: What do you consider the best methods for finding deals?

HC: In today’s market it is all about referrals.   Talk to people and tell them what you do.   Think about your sphere of influence.   Everyone knows 250 people and they in turn know at least one person.   So now you have at least 500 people you are connected to on some level. You must constantly use your own referral base to build your business.

FI: What advice would you give to new professionals just starting out in the industry?

HC: The first and most important thing is to get on that phone and be able to take rejection.   If you can overcome rejection you can succeed.

Initially a consultant needs to be able to make 250 calls per day and learn from each call. Out of those 250 calls you might get 15 leads to follow up on.   Then follow the lead from the starting point to the ending point.   Understand what the factor likes and their requirements then participate in the funder/client conference calls and just follow the whole process.

FI: What is the most common business mistake you see people make?

HC: Consultants often get hung up on that one deal and just won’t let loose of it.   It is the old adage that you have to throw enough deals against the wall and have enough leads working in order to make something happen.

FI: Given the current economy, have you made any changes in the way you transact business?

HC: One of the most challenging aspects of being in the factoring business now is evaluating credit.   A company’s credit can change on a daily basis.

For example someone called me up this morning on a $500,000 receivable owed by a well-known company.   Now I need to double check on how that company is fairing in the current market. It is a very challenging economy and nothing is a given anymore. We must double-check everything.

Where can people contact you to obtain more information? Our website is a great place to start for factoring information and transaction guidelines.    You can also contact me at hchernin@Quantumfunding.com or by phone at 201-799-4342. Tobi Wilkins, VP of Sales and Marketing, is also available at tobi.wilkins@quantumfunding.com or 201-799-4348.

FI: Is there anything else you would like to share with our readers?

HC: We encourage the consultant to participate in our conference call with the client.   This is such an important part of the process. The factor and client can both understand what is needed from each other.   It also keeps the consultant in the loop and they know first hand what it takes to get the deal done.

There are two key words in our business; partnering and collaborating. You must be able to partner and collaborate with other people to succeed.

FI Summary: Helping businesses raise cash through factoring account receivables is one of many cash flow categories where consultants can earn commissions by referring transactions to funding sources.

No matter what industry you are in, it is easy to get bogged down with the little things.  

Some people are so focused on their business name, business cards, stationary, website, and office furniture, they forget the biggest goal;  

Getting the Phone to Ring!  

Sure it sounds basic, but you wouldn’t believe the number of people who focus on everything but getting the phone to ring. Matter of fact, you should be spending at least 70% of your time looking for future business. If you fall below 40% you need to reprioritize or hire out some of your time consuming work.  

So how do you do it? Well, when it comes to marketing, you should be focused on three areas.  

1. Clear Message - Chances are you can ‘talk the talk” when it comes to your business. You might even be able to talk circles around colleagues, but that wont help you in your marketing. Oftentimes people create elaborate marketing messages that only confuse people. People don’t need any more confusion in their lives. Matter of fact, they will gravitate to the least confusing solution. Make sure your marketing message speaks, clearly, to the intended audience.  

2. Qualified Mass – Don’t send your marketing message out just random. Target your market. For example, if you wish to target staffing agencies, placing an advertisement in the newspaper is too costly for the off chance someone who runs a staffing agency is reading that part of the paper. Conversely, you need only open your phonebook, search the Internet, or go through a good list company to get all the names and addresses your want.  

3. You Just Want Them To Call – The goal of any marketing should be for the potential client to want more information. Sometimes consultants put too much information in their marketing. So much in fact the reader has already made a decision on whether or not they need your services. Your goal should be to include just enough information so they are curious enough to call you; that is where deals will be made.  

In the end, it doesn’t matter how great your product or service is if no one calls you to ask for more information. Focus your efforts on marketing, test different methods, and get that phone to ring. The rest will take care of itself.  

If you missed this informative event IFA has made it easy to listen to the 2009 factoring conference sessions on audio CD.  This year’s session handouts are also available for download in PDF format.

For more information visit the IFA site.

A factoring broker has excellent earning potential referring business to factoring companies for accounts receivable funding. But before there are commissions there must first be prospects, which all stems from active marketing.

Successful factoring brokers continually turn to referral based marketing as a key component of an effective marketing plan.   Consider these five proven performers when developing factoring referral business:

Banks

The banks are often in the unfavorable position of saying ‘NO” to requests for business funding, especially in the face of the current credit crunch.   Many lending officers find the burden of turndowns is lightened by being able to say, ‘While we can’t help you with this current funding need you might consider ABC Factoring for financing alternatives through accounts receivable factoring.”     Use this strategy to develop working relationships with corporate lending officers, business account managers, and other bank contacts regularly involved with financing business.

Accountants and Bookkeepers

Any professional that is involved with the financial records of a business can be an excellent source of referrals.  Accountants and bookkeepers can be the first to know when their clients are in need of additional cash flow to pay bills, meet payroll, or fund expansion.

Business Networking Groups

Networking with other business professionals is a standby to business development.   These are often found through the Chamber of Commerce or national organizations such as Business Network International or LeTip.   The internet is also a source of network groups dedicated to creating qualified leads through member interaction.

Purchasing Agents

Factoring companies prize clients that have creditworthy customers that are reliable payers but take an average of 30 days to pay.   Rather than focusing first on the ultimate business client try contacting the purchasing agents for government agencies, school districts, utility companies, or large corporations.   These purchasing agents work with the vendors that provide their company with goods and services.   A factoring broker can then target business development with these vendors that are creating invoices with strong creditworthy customers favored by the Factor.

Personal Contacts

The first place to naturally turn for referral business will be people you personally know.   These are friends, family, co-workers, business owners, or any acquaintance with which you have developed a personal or business relationship.

When developing referral business always keep in mind the WIFT (What’s In It For Them) principal.   A personal contact might refer business just to help you out while a business contact might be more concerned about earning a referral fee or meeting the needs of their own business client.   By targeting referral marketing a factoring broker can develop qualified business prospects in need of funding through accounts receivable factoring.

Cash is always in demand so there’s no shortage of companies that can benefit from the business funding factoring provides.   The greater challenge is finding a business that is likely to receive funding from a factor. Ask these 4 questions to identify a good candidate for factoring accounts receivable:

1. Who is the Customer?

A business that sells to the government or another business will make the strongest factoring client.   Most investors do not factor invoices that are paid by an individual consumer.

If marketing to companies as a factoring broker that means to generally avoid retail stores and any other direct to consumer type business.   Instead target a company with business-to-business or business-to-government invoices to satisfy the preference of factoring companies.

2. Does the Customer Qualify?

A factoring company looks for payment from the customer that owes money on the invoice.   This debtor must be credit-worthy to qualify for an advance on the invoice.   As part of the screening process the factor will review aging reports and a credit history on the debtor.

Unfortunately, many businesses are not sure if their customers are good credit risks until they don’t receive payment and it’s too late.   Using the factor to pre-qualify customers before extending payment terms can be a benefit to the business in addition to the immediate cash advance (more details at  How to Be Sure Your Business is Paid).

3. Does the Invoice Qualify?

In order to advance funds on accounts receivable the goods or services must have been delivered.  A factoring company won’t discount an invoice if there is still work to be performed or product to be delivered.

The invoice also must be free of any offsets.   An offset is when a customer can claim a credit against the money they owe for some reason.

4. Will the Business Prospect Benefit?

If a business is receiving payment immediately or within 10-15 days they may not see an advantage to factoring. However a company that is waiting 30 or more days is more likely to need and recognize the benefit of receiving an immediate cash advance.

Startup companies, fast growing industries, and those not yet considered ‘bankable” by business lenders often benefit from factoring.     They have cash needs for bills, payroll, overhead, and expansion that are not being met through traditional business loans or lines of credit.

Whether considering factoring for your own business or marketing to businesses as a factoring broker, the answers to these questions will help determine if factoring account receivables will be a viable solution.

Like with most businesses, the elevator speech is a brief commercial describing your services that can be used when contacting customers in person or by phone.

Here are five key elements of any successful elevator speech:

1. Personal and Business Name
2. Services Offered
3. Who benefits
4. What’s In It For Them (WIFT)
5. Duration of 30 seconds or less

This introduction assumes there is a limited amount of time, like an elevator ride, to describe what you can offer. When putting the components together, a factoring consultant elevator speech might sound like the following examples:

“Hello! My name is Tracy Rewey with Diversified Investment Services. We help companies generate cash by purchasing outstanding invoices. We specialize in saying yes when the banks say no. Please contact us if you or anyone you know can benefit from an advance on their accounts receivable.”

“I’m Joe Smith owner of Cash Flow Solutions. We supply something every business needs – money! We provide cash advances on slow paying invoices. Rather than waiting 30 days for payments, our clients have immediate access to funds to meet payroll, pay bills, take advantage of supplier discounts, or expand their business.“

The elevator speech should be customized to your individual style and the types of clients targeted. Be sure to spark interest and finish by handing the person a business card kept handy in a jacket pocket or an outside compartment of a briefcase.

Practice makes perfect so recite in front of a mirror and practice on family or friends. Once you have the elevator speech mastered you’ll be ready to use network marketing to develop clients that can benefit from accounts receivable financing.