The factoring world is changing – can your funding sources keep up? Your success as a broker hinges on your ability to place prospects with factoring companies that will close the deal. It is critical, then, that you focus you energy on working with funders that are prepared on every level to accept leads from brokers. So, are factoring companies prepared to effectively handle your leads? Below are some important things to consider before sending leads to any factoring company. Have a conversation with each funder before referring deals in which you learn their expectations of you, establish your expectations of them and make sure you are comfortable with their ability to meet your requirements. If their system doesn’t measure up, you … [Read more...]
Should Factoring Intermediaries Double-Broker Deals?
The subject of double-brokering opportunities has been a hotly debated topic since I joined the industry, over a decade ago. The gist of the argument is as follows: factoring companies believe that brokers should not “shop” opportunities and place them with multiple factoring companies. On the other hand, many (but not all) brokers want to be able to place deals with two or more factors. Let’s look at both side of the argument. Summary: The factoring company point of view For several reasons, most factoring companies don’t like brokers placing the same lead with multiple factors. First and foremost, it increases their competition. It’s natural and understandable that companies don’t like the fact that they have to compete against other … [Read more...]
6 Tips For New Factoring Companies
In recent months I have been writing about brokers who want to start their factoring companies. This is an important topic for brokers since many want to move to the direct funding side of things. Unfortunately, most have unrealistic expectations about their chances of success. They like to focus on the potential positive aspects of the move, such as higher revenues. But they often ignore the obvious risks, such as losing principal or going out of business. Here are six tips that will help you survive your first year as a factor. 1. Double your marketing budget One of the toughest things in this business is getting clients. Due to intense competition, the cost of acquiring a client is very high. New factoring companies often underestimate … [Read more...]
5 Business Cash Flow Resolutions for 2014
January offers the first opportunity for businesses to evaluate their performance during the busy holiday season and, for many, to consider and commit to a plan for the coming year. Unfortunately, if cash flow is tight during this critical time then it can set a business up for failure. Whether you believe in making resolutions or are afraid of breaking them, we have five business cash flow resolutions that companies can use to eliminate (or greatly reduce) their cash flow concerns. Resolution #1: Control your outward cash flow Are you overpaying for services or, worse, paying for services you don’t even need? As service contracts come up for renewal, look carefully at your expenses and decide if you are getting the best value for your … [Read more...]
Is This The Golden Age of Invoice Factoring?
It’s usually during this time of year where you will find a bunch of business articles that reflect upon the events of the past year or take a stab at making predictions for the next earnings period whether it be quarterly or annually. Instead of following suit and subjecting you to the same old topic I would rather take a look at... The present state of the factoring industry. When you hear the term “Golden Age” of something it typically represents a period of great peace, prosperity and happiness. Usually we think of periods of history in Greek and Roman mythology when civilizations thrived in the arts, literature and science. Obviously it sounds like a stretch to associate invoice factoring with the historic cultural periods of the … [Read more...]
Should Brokers Start Their Own Factoring Companies?
Most brokers who join the factoring industry expect to eventually own a factoring company. They plan to start as brokers due to the lower cost. This approach allows them to get some revenues and experience, with the hope of eventually becoming a full-fledged factoring company. This strategy is fine, as long as you realize that running a factoring company is completely different from running a brokerage. The costs, needed skill set, risks, rewards, and challenges are very different. Do you have the capital? The first question to ask yourself is if you have sufficient capital to start factoring accounts. This attainment is not as easy as it sounds. Obviously, you need enough capital to service your clients. This simple table gives you … [Read more...]
PayPal Offering Working Capital To Business Account Holders
Well-known for its online payment processing, PayPal™ is now venturing into the world of working capital funding for businesses. The new financing program is geared towards small business owners and publicized as an alternative to traditional bank loans. We have been using PayPal™ here at Factoring Investor to accept payments online in the Bookstore since we first started publishing our newsletter online in 2008. We are familiar with its ease of use and secure processing. The part that came as a surprise was their recent marketing email touting similar benefits to factoring invoices. Here is a quick excerpt: If you’ve been thinking about growing your business with PayPal™ Working Capital, we’re here to help. It’s easier funding for … [Read more...]
Ongoing Due Diligence Ensures Healthy Factoring Relationships
Every business that extends credit to its clients understands the importance of due diligence. Just as most people would not blindly hand over a stack of cash to a stranger on the street, factoring companies do not begin purchasing invoices from clients whose businesses they do not understand. Once the client relationship is established, it is easy to become comfortable with the routine of purchases and collections and ignore due diligence entirely. This complacence can prove disastrous for the client relationship. Tax issues, debtor concerns, and client malfeasance can all fly under the radar until the situation requires a more serious (often legal) response. Fortunately for factors, a variety of services exist to make the process … [Read more...]
The Factoring Company Waiting Game
Whether you’re in line at your local grocery store, sitting in a doctor’s office or just looking to grab a bite at your favorite restaurant, we all have to wait. In our modern world of instant text messaging, mega fast downloads and next day deliveries we’ve become a society that expects everything when we want it and the faster the better. The same is true in the factoring industry. How many websites (including yours truly) boast phrases like “Same Day Funding” or “Approvals in 24 Hours or Less”? Let’s face it, with almost any service provider, speed is king. The first question we usually get from new prospects is how long will it take for them to get funded. In most cases they expect to be funded in a few days or less. Brokers … [Read more...]
Why Factoring Works
Working capital - Every business needs it but at what cost? One of the main reasons why I enjoy working in the factoring business is that the concept is simple and easy to understand. Factoring companies provide businesses with working capital by purchasing their client’s outstanding receivables. Typically a factoring transaction is an arrangement between three parties (client, factor and vendor) all of whom are businesses. The business owner understands his profit margins and the expense associated with factoring while the factor evaluates the risk. In most cases the increase in cash flow will not only justify the cost but actually lower operating margins by increasing sales for the business. But why is factoring so popular … [Read more...]