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!

Companies across the gulf coast are being awarded contracts to aid in the clean-up efforts. Invoices are being created for everything from absorbants and booms to staffing and shovels.

Oil Spill Cleanup Image © BP p.l.c

But like most businesses, it can take 30 or more days to receive payment on outstanding invoices. In need of funds to help meet the growing demand, business owners are turning to an age-old financing solution – account receivables financing.

The search for factoring companies

willing to fund these deals has been a hot topic in the networking forums. Several companies have expressed a willingness to consider receivables with BP as the debtor, including:

Transfac Capital at www.transfac.com or by phone at 800-458-6056 x118

ETG Capital at www.etg-capital.com or by phone at 212-300-6791

Marketing for clients in need of ar funding for cleanup supplies and services can yield good results for savvy factoring brokers.

Just realize that most funders are likely to require a direct obligation from BP along with other protective underwriting criteria. This is a developing niche so modifications to funding parameters are highly subjective to change as the story continues to unfold.

There is no doubt everyone wants to see an end in sight for the gulf disaster. And if the cash flow business can can aid the efforts, then all the better!

This online networking platform is doing for business what Facebook did for friends and family.

LinkedIn offers free membership for networking with over 70 million members in 200 countries.  But even better, you can specify the type of professional groups you want to actively follow.

The factoring industry alone has over 50 Groups focused on this specialized segment of commercial financing.

If you are a factoring broker be sure to check out these most active groups:

• Commercial Finance Association
• Factoring Professionals (FP Americas and FP Europe)
• Trade Finance, Factoring and Forfaiting Professionals
• The Global Commercial Finance Network
• FactorNet Lead Referral and Networking Group
• International Factoring Association
• De Lage Landen Member Community
• Asset Based Finance Association LTD
• International Factors Group
• National Funding Association
• Commercial Finance Today
• Factoring Brokers

Recent discussions ranged from where to find accounts receivable funders for dentists to the potential impact of the Wall Street Reform Act on the factoring business.

So what are you waiting for?

Leave the embarrassing photos and weekend updates to Facebook and start using LinkedIn to network with factoring professionals that can help grow your business.

But when are these factoring commissions paid?

Last week Factoring Investor received this question from a factoring broker on the handling of referral fees that we asked Michael Ponomarew to answer for our readers. Maybe you’ve wondered the same thing.

Question: Are there are any factoring companies that pay a referral fee at the time the advance is made on the invoice or do all factoring companies wait until the invoice has been paid and the reserve released to pay the broker’s commission?

Michael Ponomarew: In answering your question, I do not know of a Factor that would pay the referral fee/consultant commissions until the customer (debtor) has paid for the invoice(s). A factoring transaction is not complete until the customer (debtor) has paid for the total value of the invoice purchased by the Factor.

It is important to know that the reserve is released pending the aging of other outstanding invoices. The release and payment of the reserve is a non-issue when it comes to paying consultant commissions or referral fees.

What typically happens is a Factor will pay commissions for the preceding month’s collections or payments of the invoices that the Factor purchased. For example, on all of the collections or payments received during the month of May the consultant would be paid their commissions during the first week of June.

Michael Ponomarew brings with him more than 24 years of experience in entrepreneurship, marketing, and factoring business management. Mike can be reached at mikep@millenniumfunding.com or by calling 888.652.8298 ext. 45.

It’s actually pretty simple to keep the conversation rolling if you use these seven questions.

What type of business are you in?

How did you get started?

How long have you been doing this?

What do you like most about your business?

What are the biggest challenges in growing your business?

Do you ever have to wait for customers to pay you?

Would it be helpful to have access to cash without debt, whenever you wanted?

Why do these questions work?

Most people, especially business owners, like to talk about what they are doing. The questions help break the ice without being threatening. They let you shine as an attentive listener, all the while gathering information and gently directing the conversation towards the factoring services you provide.

At some point there will be an opportunity to tell them about your business.

Then you can simply respond:

“I help businesses get the money they need to grow, meet payroll, or pay bills. We provide financing solutions by turning invoices and accounts receivable into cash, in as little to 24-48 hours. Please give me a call if you or anyone you know ever needs working capital without debt.”

Be sure to exchange business cards and follow up the meeting in a couple of days with a phone call, brochure, or personalized email. Even if the new contact does not need to discount invoices, they might refer other companies in need of factoring services.

Networking for factoring prospects does not have to be painful when you use these friendly questions to let the business owners do the talking!

Looking for more ways to market your factoring services?

Be sure to read Marketing Tools For Small Factors and Consultants, a compilation of the best marketing techniques shared by 7 successful factoring professionals.

Factoring Investor (FI) asked Duane Marchant, founder and president, to share some information on working with his company.

FI: What transactions will your company consider funding?

We handle the following receivables:

• Spot Factoring
• Manufacturers
• Temporary Employment Services
• Consulting
• Import Distributers
• Janitorial Services
• Defense Contractors
• Food
• Communications
• Government Vendors
• Computer Hardware/Software
• Professional Services, and Others.

We also partner with other factoring affiliate companies on Transportation, Construction, Medical and Other transactions.

We prefer deals $250 to $50,000 Account Receivables (AR) per month but will consider funding larger AR per month.

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

Duane Marchant:

After 25 years of professional business management experience over two public companies, I stepped down as CEO to start a private funding business in 1997 to provide alternative financing for businesses in need of working capital to sustain and grow their business.

I was first introduced to factoring by attending an “American Cash Flow Training Seminar,” in 1995.

FI:  What unique benefits does your company provide?

Our professional commitment to aggressively provide prompt client financing solutions, even when other lending institutions have said “no”.

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

• Strategic referral partners

• Small commercial bankers and mortgage brokers

• Writing and posting articles

• Networking on and offline

• Technological tools in cyber space

• Brokers and consultants

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

We welcome the opportunity to partner with brokers and consultants and offer competitive industry commissions.

Due to strong demand, we will be offering a “6 week Broker Factoring Taining Course” to help new brokers learn the factoring business and how to market their services more effectively.

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

1.  Learn the factoring business so you can both talk the talk, and walk the walk.

2.  Establish a relationship with several factoring companies, learning their submittal requirements and establish a personal relationship with their representative. Factors are always willing to help the new professional learn and earn.

3.  Recognize this is not a get rich quick program and the new professional must have staying power. Remember you are building a business which takes time and consistent effort.

4.  Get mentoring and training from successful Master Brokers and learn from their experience.

5.  Don’t get sucked in by every new bell and whistle and don’t spend thousands of dollars. Most advise and training is free or minimal dollars.

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

* Not having a written marketing plan.

* Failing to recognize the necessity of CONTINUOUS MARKETING, professionally, effectively, affordably, and consistently.

* Too many think of marketing their factoring services as an event, rather than as a constant repeated process.

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

We believe technology advancements in our economy have permanently changed the marketing arena.

The marketing audience is splintered among many different online media outlets. We are using online technology and social media as a significant part of our marketing efforts to reach a broader customer base, also to improve our customer service.

Bank financing is still very constricted and many businesses are seeking alternative financing. As a result, we have been busier factoring accounts receivable, than at any time in our 13 year history.

The federal government policy decisions and controls recently instigated may have changed bank financing for the unforeseeable future… the Factoring Industry is the beneficiary.

FI:  Where can people contact you to obtain more information?

AAA Factoring Group

364 West 1500 North, Suite 100

Centerville, Utah 84014

Phone: 801-292-1220

Email: duane@aaafactoring.com

Website:  www.aaafactoring.com

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

We’d like to share a recent press release on our efforts in helping Haitian Amputees and Small Businesses Get A Leg Up From AAA Factoring Group.

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.  For a full listing of factoring companies please refer to the 2010 Directory of Factoring Companies and Service Providers.

Well we found several “must have” factoring broker kits while researching our updates for the 2010 Factoring Directory.

And the best part is I’m going to tell you where to download two of them today for free!

At a minimum a factoring broker kit should:

1. Detail the types of accounts receivables a factor will buy
2. Outline the minimum qualifications for a business seeking invoice factoring
3. Provide the application for registering as a factoring broker

But sometimes a company goes a step further by providing that little something extra to help you succeed as a factoring consultant. They know if you find more deals, then together you can both make more money helping clients find working capital. These additional resources include:

• Where to Find Factoring Prospects and Referral Sources
• How to Answer a Business Owner’s Objections to Factoring
• Sample Marketing Brochures
• Scripts for Contacting Business Owners

So, where do you find two of the factoring broker packages that meet and exceed our expectations? Just follow these links:

http://www.hamiltongroup.net/brokers/index.html

http://www.paragonfinancial.net/toolbox.asp

These broker packages are like mini “how-to” factoring help courses for finding and developing clients.

Looking for more great resources, factoring services, and funders? Be sure to grab your copy of the new 2010 Factoring Directory.

This disturbing trend in accounts receivable financing is affecting both business owners and factoring companies. Here’s an enlightening update:

Beware! There are two types of customers who may be falling into the slow pay category. And they’re the last ones you’d suspect.

Now’s the time to talk to your CFO and Accounts Receivable manager to see if they’ve noticed this troublesome trend:

Many companies in all industries are now reporting major payment slowdowns from two critical groups:

• their biggest customers, and
• their best customers.

Not something any company can afford right about now.

And each group warrants a different approach to stop this in its tracks.

1. Big customers

Any companies that have large firms in their customer database will need to devote some extra time and attention to these accounts.

The biggest of the big companies are taking 5% longer to pay their suppliers than they did a year ago.That’s from experts out of REL Consultancy.

The kicker: These same businesses are cranking up their collections efforts to boost their own cash flow.

Turnabout is fair play here. True some mega-customers tend to call their own shots. But it doesn’t mean your business is powerless over your cash position.

You can do everything from simply highlighting payment terms on the next invoice and calling a few days before payment is due to adding finance charges to the bills (if your contract allows for them).

2. Best customers

Of course you don’t want to get walked on, but you don’t want to risk losing customers, either.

Especially if accounts have been good payers until now.

More and more companies are telling us that even their most reliable customers are now having trouble meeting due dates.

Make sure credit and collections people aren’t taking too hard a line.

The key: That finance staffers are empowered to be flexible in how they structure payment arrangements with these particular past dues. You have a slew of options that your finance chief can offer.

After all, they were your best customers for a reason, and they probably will be again when the economy stabilizes.

Article Source: Alert – The new worst-paying customers by Jennifer Azara, March 10, 2010 at http://www.businessbrief.com/alert-the-new-worst-paying-customers/

Invoice factoring is a form of financing that is often offered by factoring companies. It’s ideally suited for companies that are selling goods/services on net 30 to net 60 days, but can’t afford to wait for payment. This is a common problem since most medium sized companies have immediate expenses and don’t have the necessary capital to wait for payment.

Factoring companies solve this problem by accelerating payment of your invoices. They act as an intermediary who buys your invoices and pays you for them immediately. This provides your company with the necessary cash flow to pay operating expenses and handle new orders. The factoring company, which now holds the invoice, waits for your client to pay for the invoice and settle the transaction.

A factoring company usually buys your invoice in two payments. The first payment, called the advance, is usually 80% of the invoice. The remaining 20% is called the reserve and is held to cover any invoice discrepancies and potential underpayments. Once your client pays the invoice in full, the factoring company sends the second payment, which is the 20% reserve less the factoring fee.

Factoring fees are determined by the credit quality of your clients, the volume of financing that you need, your industry and invoice diversification. They vary in range but they are usually a specific percentage of the purchased invoices.

One of the big advantages of invoice factoring is that factoring companies consider the credit quality of your invoices to be your biggest asset. This means that medium sized companies that have a solid roster of clients can usually qualify. However, to qualify for factoring your invoices need to be free of any potential encumbrances or liens.

Marco Terry
About Commercial Capital LLC

Are you looking for a factoring company? We are a leading factoring company and can provide you with a competitive factoring quote. For information, call (877) 300 3258.

Article Source: EzineArticles.com – Using a Factoring Company

Earning $50,000 – $250,000 per year?
Full-Time, Part-Time, or even Spare Time!

Today’s Credit Crisis can be Your Opportunity for Wealth! To say times are tough would be a gross understatement.

Unemployment rates are skyrocketing and the U.S dollar is trading at an all time low against the euro and yen. These and other factors have created the perfect storm for this recession and a downright disaster in the dying credit markets.

Small to mediums sized businesses that need the cash are turning to Factoring companies to sell their accounts receivable and get the cash they need fast!

That’s where you come in…

By leveraging your professional skills and background it’s possible to
earn $50,000 – $250,000 per year brokering factoring relationships.

Tuesday, March 23rd, 2010 – Two Times to Choose From!

Click Here for 2 p.m. EST

Click Here for 9 p.m. EST

We are sorry you missed this webinar. Please sign up below to be notified of our next event and the latest factoring news.

To find out more Register for this FREE Webinar where you will learn:

• Why now is the single best time in the history of factoring to be taking part in this lucrative $136.1 billion dollar industry
• How to work once and get paid over and over again for up to 5 years
• How you can leverage your professional skills and background to earn substantial income brokering factoring relationships
• How You can set Your Own Schedule, Build an On-Line business, and Control your Financial Future
• The Four Step process to start finding clients and earning income right after the Webinar

Come spend 30 minutes with Mike Ponomarew and discover how to make money in 2010 as a factoring broker!