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Deal Submission

Submitting a Deal

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Submitting a Deal to a Factor

For independent brokers and consultants, deal submission in the factoring industry is a relatively simple process. 

Step One:  Get an Application

When submitting a deal to a factor you will need a completed client application or a broker’s “Company Profile” which is a broker specific generic application you will create using a text editing program such as Microsoft Word, Publisher, etc.  The prospective client must complete the Profile / Application, date it, and sign it.   NOTE:  IACFB Sponsored Agents are NOT responsible for applications or profiles.

Step Two:  Get an A/R Aging Report

Always try to get a current accounts receivable aging report from the prospect.  This report, generated from the prospects account software, will document the current receivables outstanding, the name of the account debtor (customer), and how long the invoices have been outstanding.  It is not uncommon for a business owner to seek factoring in the hope that the factor will buy invoices that are way overdue and in jeopardy of non-payment.  If you see an aging report with a large percentage of past due invoices, there is a problem and it’s unlikely the deal will be accepted.  NOTE:  IACFB Agents are not responsible for securing Aging Reports.  This will be done by IACFB Account Executives.

Common Submission Mistakes

As you should now know, deal submission in factoring is deceptively simple but there are several very common mistakes made by “newbie” brokers and they almost always involve identifying the type of financing needed.  As a new freelancer, you will understandably be excited when you get your first completed company profiles, but don’t let your excitement allow you to make any of the following mistakes.

  • SIMULTANEOUS SUBMISSION: As an expert consultant, you always want to refer your clients to the right factor and get them a “good deal”.  Never, however, fax or email simultaneous submissions to different factors at the same time.  Simultaneous submissions are very much frowned upon in the industry and if discovered, will cause most factors to simply walk away from the deal.  Brokers should choose a factor carefully and then let that factor do its initial underwriting to either accept or decline the deal.  The industry is very competitive from a fee standpoint and if you have chosen a factor in the right niche area and your client qualifies, there will be no need for any subsequent submissions.
  • KNOW THE DIFFERENCE BETWEEN FACTORING AND CONTRACT FINANCE: We’ve already discussed this in the previous chapter but here it comes again.  The biggest mistake made by industry neophytes is the inability to know the difference between a financeable FACTORING deal and CONTRACT finance which involves no invoice but the need for what is termed mobilization money to get a project started. Contract finance is similar to purchase order finance except for one major distinction:  Contract Finance usually involves a small business who is the beneficiary of a contract to provide a service.  Purchase Order Finance usually involves a small business who is the beneficiary of a purchase order to deliver goods.  Both involve the need for some form of mobilization funds, however contract finance involves additional risks that are unacceptable to almost all lenders since there is initially no collateral (no invoice or goods). 

Almost all “newbie” brokers make the mobilization funding mistake, usually because they think there might be something they’re missing in the deal and it can somehow be done.  So, they run it by a factor just to see.  Mobilization funding deals will always be declined unless the funding is based on a valid invoice.  Query the prospect to find out if he or she has other invoices where the work has been performed but payment has not been received.  Perhaps these can be substituted and used to provide the needed funding.  

Beware of Deal Breakers

When prospecting and pre-qualifying clients, all brokers should be aware of “Deal Breakers” PRIOR to submission to a factor.  Deal breakers will include:

  • Previous lender in place that is secured by accounts receivable
  • Large federal tax lien
  • Unacceptable invoices types 
  • Unacceptable size (total invoices available for purchase under $10,000