A How To Guide For Factoring Brokers

How To Become A Factoring BrokerAbout a month ago, I posted a discussion on LinkedIn about how to become a factoring broker or consultant in the invoice factoring industry. Specifically, we put together a guide for new and current brokers titled, “Guide to Wholesale Factoring.”

The guide contains information on industry related topics including, benefits of factoring, factoring vs. bank financing, sample transactions, targeted industries, qualifying prospects, overcoming objections and more.

The response was absolutely overwhelming!

Within a day of entering the post, we received requests from brokers in the United States, Canada, Mexico, Great Britain, Slovenia, New Zealand, China, Saudi Arabia, Africa, and China. I was floored that so many people from around the globe knew what factoring was and wanted to learn how to participate in the industry.

For those of you that missed our guide and are interested in learning more about brokering or just the factoring industry in general, here are a few key points that we feel you might find useful.

Factoring Defined

Factoring refers to an arrangement whereby a factor purchases an account(s) receivable from a business at a discount to the face value of that receivable. The factor earns a fee based on the number of days that the receivable remains unpaid, i.e., the longer the receivable remains unpaid, the larger the fee incurred.

Effectively, the business is no longer dependent on the conversion of accounts receivable to cash from the actual payment from their customers, which takes place on typical 30 to 90 day terms. Businesses benefit from the acceleration of cash flow.

Today, the most common form of factoring fits conveniently in your wallet – the credit card. Each time a merchant accepts a credit card, the merchant (seller of the goods) is giving up a portion of the total sale to the card issuer (typically a bank) who in turn, eventually collects from the consumer.

Benefits of Factoring Invoices

Any company, whether starting out, experiencing a growth phase, or mature in years needs good cash flow. When a business sells a product or service to a customer, that business provides an invoice stating the products or services sold and the amount the customer has agreed to pay. It is an IOU from the customer to the business. Sometimes these invoices are paid immediately but quite often they are paid anywhere from 7 to 120 days.

There are a number of benefits derived from the use of factoring:

  • Immediate Access to Cash
  • Take Advantage of Early Payment Discounts
  • Eliminate Overhead and Invoice Processing Expenses
  • Build Your Credit Rating
  • No Liability on your Balance Sheet

Advantages of Invoice Factoring vs. Bank Financing

Factoring is not a “loan” – it is the sale of an asset.

A loan places a debt on a balance sheet, and it costs interest. By contrast, factoring puts money in the bank without creating any obligation to pay it back. Thus having more cash on hand and fewer receivables strengthens one’s balance sheet.

Loans are largely dependent on the borrower’s financial soundness. With factoring, it is the soundness of the client’s customer that matters most – a real plus for new businesses without an established track record.

These are just a few key points that are covered in our “Guide to Wholesale Factoring. For those new to the factoring industry there are many associations, professionals and publications that provide educational guidance and useful information about the factoring industry.

While you’re at it, check out this publication for great insight from professionals giving you their perspectives and experiences on a wide range of factoring topics. This is a great time to get involved in the factoring industry with many resources available to new brokers.

Factoring Company Don DAmbrosioDon D’Ambrosio is the president of Oxygen Funding, Inc., an invoice factoring company located in Lake Forest, California or online at www.oxygenfunding.com.

For a complimentary copy of his How To Guide for Factoring Brokers and to register as a broker please email don.dambrosio@oxygenfunding.com. 

Additional Articles by Don that you might enjoy include:

Starting Your Own Factoring Business? It’s Your Call

Getting In the Factoring Business – Part Two

The Factoring Business Notice of Assignment – Never Fund Without It

About Don DAmbrosio

Don D'Ambrosio assists companies with cash flow needs through invoice factoring services. You can connect with Don online through the Oxygen Funding website, LinkedIn or Google+

Comments

  1. Great article and what a great ancillary source of income for mortgage brokers.
    If you are a mortgage broker, hang your license with me and get the added benefits of factoring.

    Great Job Don!

    Michael Foote

  2. Excellent and concise article on the opportunity to participate in this business with a quality factoring firm such as Oxygen Funding. Only company I know of in this space that provides a comprehensive guide to it’s participating brokers to help them take their sales efforts to the next level.

    Keep up the great work, Don!

    John Hamel

  3. Good Article Don. Keep it up .

  4. George H. Harrison says:

    For a complimentary copy of his How To Guide for Factoring Brokers and to register as a broker please email don.dambrosio@oxygenfunding.com.

  5. George H. Harrison says:

    Geo. H. Harrison
    P. O. Box 458
    Hebron, MD 21830

Trackbacks

  1. […] you wanted to pursue your own factoring business as a direct funder. In our November 2011 article, “A How to Guide for Factoring Brokers”, we discussed selling points for brokers to use when approaching potential clients in need of cash […]

  2. […] Editor’s Note: Don followed up this popular article with more great information.  Be sure to read Getting In the Factoring Business – Part Two and A How To Guide for Factoring Brokers. […]

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