OnDeck. Rapid Advance. BlueVine. You can hardly turn on a television or radio or conduct an Internet search for factoring without these and other cash flow lending sites popping up. Alternative lending has become a highly publicized and, dare we say it, popular funding option for businesses to pursue.
Great, you say. Why should I care?
Over the last two months we covered a variety of situations that make a traditional factoring arrangement difficult, if not impossible, to close. Cash flow lenders can fund those deals that factoring companies are unable or unwilling to touch, adding another arrow to your quiver of resources to benefit your prospects.
Alternative lenders can work with nearly any deal, including small medical deals; business-to-consumer companies; construction deals; and deals with poor debtor credit or guaranteed sales. You can raise your closing average significantly by working with cash flow lenders in addition to factoring companies.
To have success with alternative lending, it is critical that you build relationships with the same energy and focus that you devote to cultivating your other funder relationships. Keep the following in mind:
Cash flow lenders are not “one size fits all”.
Like factoring companies, there is some variety between cash flow lenders in regards to the deals they will accept and the terms they will offer. You won’t maximize results by focusing on just one or two lenders.
Understand each lender’s requirements.
There are many shades of lender, more so than factoring companies, and understanding the differences between them can help you target referrals more effectively. Just some of the individual requirements that vary include:
- Loan amounts – some lenders will lend six figures, while others specialize in smaller loan amounts
- Credit – each lender establishes the minimum business and personal credit scores they will accept
- Deposits and overdrafts – lenders will review the prospect’s recent bank history and may qualify or reject a deal based on how many monthly deposits they make and the number of overdrafts in a 30-day period.
- UCC position – some will require first position while others are willing to “stack” their UCC filing with others for equipment or other financing.
Do the work.
The worst thing you can do is perform a Google search for cash flow lenders, click the first few results, and just start submitting deals. You have to do the work – invest hours to days in research and starting conversations. Talk to dozens of lenders to learn who does what deals, who does the best work, and who is a good fit for you and the deals you see. If you are willing to take the time, you will see better results.
Factor Finders did the work, and it is paying off. We refer significant numbers of deals to a number of cash flow lenders, and four of our deals were funded in October alone. We work with other brokers to place deals with our partners and share commissions when those deals are funded.
If you have a number of non-factorable prospects and don’t want to give up on them, consider adding alternative cash flow lenders to your network.
About the Author: Factor Finders specializes in finding factoring companies that can fund difficult-to-place deals. Our services help other factoring brokers capitalize on commissions that might otherwise be lost.
If you have a prospective transaction that you cannot find a funder then contact us at FactorFinders.com. We’ll find the factor for you and split commissions 50-50.
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