about a freelance career as a factoring broker€¦ · about a freelance career as a factoring...

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Factoring Career Report. Copyright DataMax Marketing Systems, Inc. All Rights Reserved

About a Freelance Career as a Factoring Broker

Consulting in Commercial Finance is a unique profession in which independent agents or “brokers” serve the general small business community by assisting business owners / entrepreneurs in their search for business finance solutions when traditional bank lending is not available. Although well practiced in Europe, few individuals have discovered this unique vocation in the United States, where competition even in today’s expanding economy, remains relatively minimal. Commercial Finance Consultants (CFCs) are commonly referred to as “factoring brokers”, due to their almost singular focus on commercial factoring as a ready financing tool. Such brokers tend to come from all walks of life. Many part-time practitioners are often involved in such business service related professions as accounting, insurance, business brokerage, the real estate and mortgage industry, etc. Others, the full time CFC career-seekers, tend to be unique entrepreneurial individuals or “mobile creatives” that have discovered this very exceptional profession and subsequently invested the time and energy to gain the necessary specialized business finance expertise required to provide the service and excel in the industry.

Rapidly Growing Need

It is no secret that banks are not lending and small business owners in the United States continue to have extreme difficulty in accessing working capital. This problem is exacerbated by the fact that the most common historical sources of startup and / or working capital can no longer be counted upon to provide the resource. These include: • Equity in a Home: Though real estate values have partially recovered in many markets, large amounts of equity in family residences seldom exists. And even when a small amount of equity does exist, very few banks will lend against it.

• Credit Cards: For most, the ability to access credit cards is very limited. Usually, the start of a new business means the entrepreneur has lost his or her job making the application for additional credit difficult at best.

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• Friends and Family: Another traditional source for startup or working capital are friends and family which is clearly not as accessible as it was in the past. Many making up this group live in fear of losing their own job or are under severe financial stress.

Historically, many small business entrepreneurs have utilized community banks for small business loans as their working capital needs grew along with their companies. Those days are no more. Community banks continue to increase portfolio volume in commercial real estate loans. On average, community bank business loans now make up just 15% of total portfolio volume.

The Growing Trend Towards Entrepreneurism

Because of the well documented minimal increase in wages in the traditional jobs market, more and more Americans are starting small businesses out of necessity. Entrepreneurism is beginning to boom. Many of today’s budding entrepreneurs are opening new businesses in the service sector due to the relatively low cost of entry. Janitorial services, lawn care and maintenance companies, staffing companies, guard services, general exterior building maintenance companies, etc. all are attracting new entrepreneurs that manage to raise the capital to open the doors. What few such start ups foresee, however, is the need for growth and operating capital once the venture gets off the ground. Without access to such capital, many of these infant ventures are doomed to failure. And, since banks are not lending, the question arises, “Where can such funds be accessed?”

Alternative Commercial Finance For most new entrepreneurial business start ups in today’s economy, the need for some basic knowledge of financing options is essential. Many new business owners know little about the alternative commercial finance industry and the many financing options available to them. What’s more, most banks do not offer such alternatives as a matter of their day-to-day business and their loan officers lack the knowledge for customer referral to the proper specialized lender.

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Alternative Commercial Finance (known as ACF) does not provide the “seed” funds or grubstake money necessary to initially start a business venture. Instead, it focuses heavily on the growth and working capital needs of a business after it is up and operating and has established its first customers and sales. It will, for example, finance customer sales when 30, 45, or 60 day terms of payment have been offered, provide capital for inventory and inventory replacement, insure export and cross-border sales, finance payroll, and provide funding for equipment. It is almost always “asset-based” and often does not require the personal guarantee of the borrower. One of the strongest characteristics of ACF is its broad and ready availability to small business. For owners and entrepreneurs, gaining knowledge in this critical area of commercial finance can often mean the difference between the success or failure of their business.

Primary ACF Focus Areas While the total operating areas and spectrum of services offered to small business through Alternative Commercial Finance are too numerous to be adequately covered in this short article, the most popular areas and most broadly accessed are as follows:

Factoring: The day-to-day purchase of the accounts receivable of a business, factoring is arguably the most powerful source of small business finance available to new and early stage business owners. Nationwide, its volume of is well over $100 billion each year and it is accessible to even the earliest start ups.

Asset-Based Lending: Loans (typically in the form of a revolving line of credit) to a business using accounts receivable, inventory, and the equipment of a business as the collateral.

Purchase Order Finance: Funds advanced for the actual manufacture of goods where a firm order for those goods exists from a strong, creditworthy customer. When used in import-export trade, a purchase order finance company will post letters of credit for the benefit of an offshore manufacturer and oversee the delivery and shipment of the goods to the end customer.

Merchant Cash / ACH Advance: An advance of working capital based on the anticipated receipt of future credit card or other sales. Merchant cash is considered expensive but provides liquidity when other sources of much needed capital are non-existent. Typically, the merchant cash advance company may also be a credit card processing company.

There are many other forms of alternative commercial finance with some pertaining to import export trade. Companies with a focus on payroll finance are a rapidly growing area currently and while most loan programs of the U. S. Small

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Business Administration (SBA) cater to business owners with at least a three year operating history and reasonable credit, the unique SBA Microloan Program with loans granted up to $50,000 is an especially attractive source of financing for young companies and startups.

Commercial Finance Consulting: The Business of

Becoming an Industry Broker Though some small business owners will be referred to a proper source of alternative commercial finance by their bank’s loan officer or perhaps a CPA, others will not be that fortunate. That is, unless they luckily stumble upon an enterprising independent loan broker or, as they are better termed, a Commercial Finance Consultant (CFC). These modern day small business finance advisors come armed with an in-depth knowledge of not only alternative commercial finance solutions but also an exhaustive database of actual financing companies that provide the resource. CFCs are unique in every aspect. Much like any consultant, they develop a significant expertise in a variety of industry areas. They are professional problem solvers and understand the cash constraints of small business as well as the limitations of the banking system when it comes to granting small business loans.

Operating as a “Factoring Broker”, for example, is a well known and practiced profession in Europe but such consultants in the U.S. are relatively unknown. True full time industry professionals are, in fact, exceptionally rare. Though a Yahoo HotJobs article recently uncovered this profession , giving it a “Top 10” rating on its Hot Professions List, few article readers would be able to understand exactly what the profession involves, nor what is required to enter it successfully.

To be certain, comprehensive industry training is the “Catch22” of launching a career. No college education will prepare you for this vocation. The best industry training is that found on the job while working for a factor or similar specialty lender. To get a job with such a lender, however, you likely will need experience. The “Catch 22”.

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Making a complete career change into the industry can also be daunting simply from the fact that it will likely take several months before income begins to appear. That is, if you do everything right. Few individuals are financially prepared to start full time, tending to slowly learn the business and make a slow career transformation while they continue to earn a living from their current profession.

Earning Industry Commissions and Fees

Industry compensation for brokers / consultants in the form of commissions and fees paid for new client referrals is, by any measure, outstanding in the alternative commercial finance industry. Asset-based lenders, equipment lessors, and many others pay “points” at the closing of the loan, much like a real estate transaction. Typically, such transactions tend to be large with an average asset-based loan being in the millions of dollars. Five figure commission checks for such loans are not uncommon. Factors and purchase order finance companies provide an even more unique and lucrative compensation arrangement whereby the referring consultant, called the “Broker of Record”, is paid a percentage of the fees earned each month by the factor or PO finance company. This allows brokers to build “books” of active commission generating business and to develop a growing residual monthly income as they periodically add new clients to their practice.

And, that’s not all. Compensation for referred business is very high on a comparative basis to many other areas of consulting. For example, while a traditional stockbroker, a well known area of financial consulting, will require $50 to $75 million under management to earn a six-figure income, a successful factoring broker or commercial finance consultant that deals heavily in factoring, will need only 5% of that amount or roughly $2 to $3 million to earn $100,000+ per year. In addition to being compensated by lenders, many consultants will charge a small fee to their clients for the consultation work. Hourly rates can typically run $25 to $40 per hour but a flat rate fee of $100 to $500 is not unusual.

Consulting

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What You Will Need to Get Started

Another attractive characteristic of consulting in factoring and commercial finance is the minimal amount of capital, equipment, and office materials you will require to actually launch your consulting business. What is required will vary markedly based on your current vocational status. Are you entering on a career full time basis or are you simply attempting to augment your current profession with some additional commission income? Either way, you will likely have most of what office equipment you will need to enter the industry already which will include: • a computer (desktop or laptop) • a printer, fax, scanner and copier (4-in-1 machine) • a phone system (two line preferable) and business cell phone • a contact relationship management (CRM) system

• filing space

The vast majority of those that start out, do so from the convenience of a home office. In fact, some never leave it. Most true professionals, however, will eventually make the transition to an office located within a bank building or to an executive suite operation where they can have access to a receptionist, meeting rooms, and other “BIG OFFICE” benefits.

The “Jewel” of the Industry Factoring is affectionately known as the “Jewel”

of the industry due to its unique method of broker compensation and “Life of Account’”

payment structure which allows consultants to build books of business and monthly income!

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Business Development: Bringing In New Business

How you market your consultancy and how, when, and where you prospect for new leads and clients will, again, be very dependent on whether you enter the industry on a professional full time basis or are as a purely part-time consultant. For part-time consultants, the business tends to be simply one of networking and being in the right place, at the right time, armed with the knowledge to assist a cash-strapped business owner. Part-time consultants will focus heavily on word-of-mouth marketing and building relationships with others than can send business their way. They will have a website, publish a monthly newsletter, and spend a significant amount of time using social media such as Facebook, LinkedIn, and Twitter. Career oriented full time consultants typically attack the industry more aggressively. Yes, they will use all of the same marketing weapons of a part-timer but will also depend heavily on direct mail / cold calling, holding small business seminars / workshops, and will join multiple organizations such as the local Chamber of Commerce and fraternal organizations (Rotary, Kiwanis, Lion’s, etc.). Professional consultants network heavily with bank lending officers, accounting professionals, commercial insurance agents, and others that provide services to business owners.

Knowledge and a Professional Look are the Keys to

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Success Regardless of whether you are seeking a completely new vocation or are simply looking to make some part time additional cash to supplement your existing job, a successful Factoring Broker / CFC career entry path will require several things:

Knowledge: The most important component to any consultancy is the working knowledge and expertise of the consultant. In other words, you will not be able to earn credibility (and fees), if you don’t know your stuff. Your first task in entering the industry is, therefore, to acquire an extensive knowledge of the various product areas and to also assemble a database of product providers.

Communications Skills: As a consultant, you will live or die by your ability to communicate with prospects for your services. You will need to carefully assess your current communication skills and improve the areas where you are weak.

The “Look”: You will need to look and act the part of a successful industry consultant from day one. Financial consulting is a “suit and tie” business. You must act and look at least as good as your local banker or, preferably, even better. You will not only be judged on your expertise and financing skills but also on you’re ability to impress prospective clients with your capabilities.

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Opportunities in Commercial Finance Consulting Though a true “career” as a consultant in factoring and alternative commercial finance may not be for everyone, almost anyone can benefit from gaining a certain level of industry knowledge. In fact, simply being in the right place, at the right time, and armed with the right knowledge can mean that almost anyone can enjoy the income and many benefits associated with a “successful” entry into this unique vocation.

Although the professional requirements needed to enter the industry can present a major challenge to some, educational costs are no longer part of that equation. One of the first hurdles necessary to overcome to begin earning commissions as an industry broker is that of a financial products education. Fortunately, this has gotten a bit easier due to the internet and the enormous amount of educational materials to be found there. And while there are several business opportunity schools offering quality training in this unique career path, the costs of such training, up to $25,000 for just a few workshop days, can be financially prohibitive. For most of today’s self starting “mobile creatives” with internet capabilities, such costly training is also probably unnecessary.

Factoring 101: Affordable

Broker Training and Support For those deciding to enter the industry on a freelance basis, there is no better or more affordable way to than to become a member of the IACFB (International Association of Commercial Finance Brokers) which provides exceptional training and business development support. And it all starts with IACFB’s Factoring 101 Broker’s Guide available directly through Amazon.com.

Factoring 101: A Broker’s Guide, provides the core training necessary to build a successful freelance broker consultancy. With over 200 pages of 5-star rated material, Factoring 101 walks new consultants through the primary commission-generating product areas all brokers need to understand. It then details marketing strategies and what you will need to develop new business.

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Complete Broker Startup Programs at IACFB

The Factoring 101 Broker Training Guide will provide you with all the necessary knowledge to begin earning the life-of-account residual commission income the factoring industry has become famous for. Additionally, all guide purchasers are provided with:

Lifetime IACFB Membership

Access to the IACFB’s Factoring Broker Forums...our online community for both new and seasoned freelance brokers.

Access to the IACFB’s Learning Lab: An online additional training area for those new to the industry

Access to the Directory of American Factors and Lenders: with over 500 broker friendly factors and lenders for deal submission

To actually set up your new business and begin operation, IACFB offers two (2) primary programs:

1. The Sponsored Agents Program: a perfect program for those seeking an initial part-time entry into the industry. Under Sponsored Agents, you will “team up” with either an existing Factoring 101 broker or with IACFB itself and piggy-back on their business development programs. The program includes a website and marketing training / support. Complete information on this very affordable ($99.95 plus hosting) program is available in the Learning Lab.

2. The Factoring 101 Program: a highly affordable and comprehensive program for those seeking a true “career” as a freelance industry consultant. The Factoring 101 Program includes:

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• Business-in-a-Box: Complete access to the IACFB’s Campus ANNEX marketing materials and templates. • A professionally designed Factoring 101 Broker Website and hosting. • Access to Agency Training and Support: Complete instructions and additional setup features that will assist you in converting your one- man business into a powerful broker agency with sub-brokers nationwide. • Membership in IACFB’s Affiliate Partners Program where you can earn cash, prizes and awards for each new agent you bring in to your agency business.

Focus on Affordability All IACFB Programs offer comprehensive training and broker support and all are designed as highly affordable alternatives for “self-starters” and mobile creatives. Current program and training pricing (subject to change) is as follows:

FACTORING 101 BROKER TRAINING GUIDE: $39.95 and available directly from Amazon.com

SPONSORED AGENTS PROGRAM: $99.95 plus $9.95 monthly website hosting. Note: Under the IACFB Sponsored Agents Option, brokers are reimbursed $99.95 upon submission of the first accepted deal through IACFB.

FACTORING 101 (Business-in-a-Box): $199.95 plus $19.95 per month subscription Note: Includes hosting for our supplied Factoring 101 website and a website blog.

For questions and additional information, contact:

IACFB Business Development [email protected] Ph: (239) 274-210-0051

about a freelance career as a factoring broker€¦ · about a freelance career as a factoring...

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