A factoring broker makes money by connecting a business that wants to sell accounts receivables, or invoices, at a discount so it can reinvest the proceeds elsewhere, with a buyer for the receivables. The buyer will offer the business a discounted sum after considering the payment history on the receivables, the payer's credit and the value of the receivables.
One reason clients sell their receivables is erosion of buying power. If your client is receiving payments on receivables, those monthly payments will buy much less a few years from now because of inflation, resulting in perhaps a bigger hit than selling the receivable now at a discount. Another reason clients sell is fear that payers might go delinquent or file bankruptcy in the future. If you're considering a career as a factoring broker, do the following:
1. Look into factor brokering for freight companies, which use these services often.
2. Offer clients who need cash an invoice factoring broker service.
3. Start offering a purchase order factoring broker service.
Get paid for matching trucking companies with factoring broker funding sourcesOne business sector employing factoring is the trucking industry. Trucking companies often need to offer terms to their customers, but find themselves needing to get the money quickly rather than waiting. There are numerous capital sources that will factor these freight receivables and they need your services as a freight factoring broker.
Find funding sources for your invoice factoring broker businessYou may have some clients who can't afford to wait 30 or 60 days to receive payment from their customers on invoices for order they have filled. You will find that many funding companies will pay your business to provide factoring broker services, referring invoices to them from clients.
Secure funding sources for your purchase order factoring broker businessWhen a client has a large purchase order that they can't fulfill because it doesn't have the capital on hand to pay suppliers, the client may seek purchase order factoring services. This differs from invoice factoring, which occurs when the customer's order has already been fulfilled. Funding companies will pay your business to provide factoring broker services, referring purchase orders to them from your clients.
- As a factoring broker provider, obtaining a signed non-circumvent, non-disclosure agreement from each client will legally protect your position as broker on future deals that might happen between that client and the funding source.