How to Make Money With Factoring Companies
Moneymaking opportunities abound for factoring brokers and cash flow consultants
. Why? It's a worn out news story, but banks are still holding tight to their lending dollars in the struggling economy. As businesses look for alternative financing the demand for invoice factoring is on the rise.
Think of the factoring broker as a marketing division that only gets paid when deals are closed. The broker locates a business in need of accounts receivable funding and earns a commission for matching this business with a
Factoring Company.
Commissions are paid to the Broker by the Factoring Investor for closed transactions. While commission rates and structures vary, a broker can typically earn a commission between 5 and 15 percent of the Factor's discount.
For example, if a business factors $25,000 worth of invoices and the Factoring Company charges a 5 percent discount the Factor earns $1,250 ($25,000 x .05).If a commission rate of 10 percent is paid to the Factoring Broker then they earn a finder's fee of $125.00 ($1,250 x .10).This type of commission is generally paid when the Factor receives payment on the invoices.
Another method of calculating commissions is based on the face value of the invoices rather than the discount.The Factoring Broker would earn an average of one-half percent to 1.5 percent of the invoice amounts.For example, if the commission rate were 1 percent and $25,000 worth of invoices were assigned; the commission to the Broker would be $250.00 ($25,000 x .01).This type of commission is usually paid when the business receives their advance.
A Factoring Investor typically honors the payment of commissions to the Broker on all future advances with the same business client. This is a great source of future residual income since many businesses use factoring on a regular ongoing basis.
Most factoring brokers operate as a home based business. They market factoring services to the small and mid-sized businesses that the large banking operations often overlook. The key is to target companies that generate accounts receivables with creditworthy customers or debtors.
Factoring is one of several cash flow areas where brokers can earn fees by acting as a financial matchmaker between the customer and the investor. The cash flow industry is based on providing cash now for future payment streams.
How to Make Money With Factoring Companies
By: Tracy Rewey
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