Factoring is a very common financial tool utilized throughout the world.  Very simply, a business offers attractive terms of payment (such as 30 or 60 days) to customers to pay invoices.  Such terms of payment allow that business to attract more customers and grow rapidly.  Unfortunately, it also can cause the business to run short of cash for payroll and inventory.  Worldwide, factoring solves that problem when a business when they cannot get the money from a local bank in the form of a loan.

Although factoring is immensely popular worldwide, the vast majority of small business owners, and especially in the U.S., are not familiar with factoring.  Some large U.S. banks have robust factoring departments for their clients.  The vast majority of community “business banks” do not.  It is then up to the community of specialized lenders (factors) to provide the service.  And virtually all factors have their version of “loan officer” called business development officers, to work with business owners in need for capital, it is not nearly enough.  

Factoring Brokers as Referrers

Factoring brokers operate as independent factoring consultants.  They are well-trained in the factoring product and operate as professional “referrers”.   The true term for such mobile creatives is commercial finance consultants since most will offer many other services other than factoring such as inventory finance, SBA loans, purchase order finance, merchant cash advance, international factoring, equipment leasing, and more.  They are true freelance business finance consultants working through a host financiers and specialized lenders to provide service when traditional bank loans are not, for what ever reason, accessible.

Industry brokers come in all shapes and sizes.  Some work individually.  Others create powerful agencies with “sub-brokers” that are termed agents.  Some operate full time.  Others have discovered this unique industry and only work occasionally to earn commission income to supplement their current profession as a bookkeeper, tax preparer, business attorney, etc.  Some start small and specialize only in factoring, then add additional financial products as they grow.   

Income Potential 

Without question, what attracts home-based entrepreneurs to factoring and the exciting alternative commercial finance industry is income potential and in particular, factoring.  A recent report from Indeed, the world’s largest job website, said the average salary for a broker in the United States is $77,133 per year, with the potential to earn an additional $42,000 per year in commissions on average.

Factoring, as a part of the alternative commercial finance community, is known as the “Jewel of the Industry”, and this is because of the unique way factors compensate independent brokers for referrals.  Factoring services are almost never just a “one time shot” type of finance.  Business owners use it weekly to smooth out cash flows.  Once contracted, a typical business owners will utilize the factor’s service for 3 year, 5 years, 7 years or even longer.  As the referring broker, known as the “broker of record”, you are paid each and every month and will earn a portion of the factors fees on a recurring basis.   

Factoring Broker:  Is the Business Difficult? 

For most seasoned brokers in the industry, the consensus is that it is not a difficult business.  It does, however, take time to become successful.  This is primarily a “consulting” business and with any consulting business, it takes time to build a clientele. Although industry  commissions paid for referrals to lenders are “eye opening” to say the least, it is not a get rich quick business and will take work, patience, and persistence to become successful.  The statistics are, however, all in your favor.  Roughly 80% of all business loans, applied for by cash-strapped owners, are turned down by  their local bank.  So brokers that are in the right place, at the right time, and armed with the right knowledge, opportunities abound.