Size of the Industry and Market

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Lesson 1.05: Introduction to Factoring

Most individuals and business owners are not entirely familiar with “factoring” as a term or method of business finance.  One of the primary jobs of independent brokers is, naturally, to make them aware of this powerful financial tool.  But because it is not a comon term, don’t think for a minute this is a small or insignificant industry.  As a factoring broker, you are representing an industry that is measured in the trillions of dollars worldwide.  Find out more by viewing the video at left and then reading the article below.

How Big is Factoring?

Though certainly not a household word, brokers and agents should understand and be aware of just how large the factoring industry is.  In the U.S alone, factoring accounts for well over $100 billion in small business finance annually.  And that’s just the U.S.  Worldwide, factoring purchase and sale financings are in the many trillions of dollars.  Great Britain alone, for example, provides more than double the amount of factoring as the U.S.

Factoring Niches

Another important aspect of factoring that brokers should understand has to do with factoring “niches” or specialty areas of factoring.  Since factors purchase the invoices of a business, it is obviously critically important that those invoices are structured in such a way that they are paid by the customer under normal terms.  Or, in other words, payment cannot be conditional.  In some industries, however, full payment upon an invoice can be conditional, making it more difficult for a factoring arrangement to be established or put in place.  Such industries or sectors include clients that deal with various state and federal governmental agencies, construction receivables, staffing contractors, the trucking industry, meat and poultry packers, and many more.  And although factoring in some industries may create challenges, you will typically find a small group of factors that have found creative ways to deal with those challenges and provide financing for the sector.  

Importance of the Industry

From the standpoint of small business finance, you simply cannot overestimate the importance of invoice factoring as well as the other popular types of alternative commercial finance.  Likewise, when you consider that roughly 80% of all business loan applications at traditional banks are turned down, you cannot over overestimate the importance of independent brokers and consultants that play a vital role in assisting business owners in securing vital financing from alternate sources.  Well trained, knowledgeable brokers are a much sought after commodity in the industry and as you begin interacting with the various types and kinds of industry lenders, you will soon find out just how welcome you are.

Visit Some Factors

One excellent method of “getting a feel” for our industry and the opportunities it offers to those seeking a good home-based business / career is to visit the websites of a few industry factors and learn more about how they operate.  It is relatively easy to locate factors using your favorite search engine but we have added a few links in the column at right to some very “broker-friendly” factors we have taken from IACFB’s Directory of American Factors and Lenders.    Just click on any link to visit their site to learn more.  You will notice several of the factors we listed have specialty niche areas they service.  Additionally, you may find a ‘link” or “tab” to their broker compensation programs which you can sign up for to help you get started. 

Visit the Following Websites of These Sample Factors

California-based factors financing many areas.  Check broker program located under RESOURCES tab. https://www.bayviewfunding.com/

Excellent Invoice Credit Line rates and exceptional broker commissions.  Check broker program under PARTNER tab .https://www.universalfunding.com/

Large commercial lender featuring factoring, asset-based lending, and equipment finance.  Check SITE MAP for referral program. https://ecapital.com/

Large New Jersey – based factoring firm.  Check out their STRATEGIC PARTNERS link for broker information.  https://prestigecapital.com/

Large California-based factor.  Check out PARTNERS link for broker information.   https://oxygenfunding.com/

Large factor with offices in Alabama, Georgia, and Minnesota.  Check out PARTNERS tab for broker information.   https://www.portercap.com/

The IACFB Directory of American Factors and Lenders

The Directory of American Factors and Lenders is an IACFB database containing over 500 broker-friendly factors and alternative finance companies ready to work with you to close your deals.  The directory is provided to all Factoring 101 and Commercial Finance Consultant subscribers