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Crash Course Part 5

Factoring Broker Commission

Factoring Broker Commissions

Without a question, what attracts most to the business of brokering in the factoring industry are the near-legendary commissions paid for referrals.  Broker commissions are both residual and life-of-the-account which means you will earn a percentage of the fees earned each month by the factor and you will continue to earn that percentage month after month, year after year for as long as the factor is providing funding for your client.

This is an exceptional business for those that have the skill sets to approach B2B business owners in need of working capital, offer them the ready solution of factoring, and then earn a commission for that work year after year.

Residual Life-of-Account Commissions

Questions & Answers

How Often are Commissions Paid?

Broker Commissions are paid monthly usually between the 10th-15th of the month following the month they are earned.

Do I Get a Commission Report?

Yes.  You will get a commission report via email every month.  Depending on the factor, most show not only invoice collections and fees for the month but also new purchases of invoices so you can kind of plan on what you will be receiving the following month.

Commissions, Earnings, and Income Potential

Without question, the feature that draws most entrepreneurial self-starters to the factoring industry is the very unique (and lucrative) method factors employ to compensate independent brokers for business referrals.

Percentage of Earned Fees Paid to Brokers

As you learned in Part One of the Crash Course, factors earn “factoring fees” when they finance invoices.  The fees are set by a grid or formula and are typically charged in “windows” which are 10 or 15 day periods of time.  The longer an invoice is outstanding and remains unpaid, the higher the factoring fee.

The referring broker of any client (called the broker of record), earns a percentage of the factoring fees on each and every invoice.  The industry standard is 10% of the factoring fees earned by the factor.  IACFB, however, Factoring Broker Earning Commissionswill pay of to 15% to brokers and referrers.  On rare occasions such as during promotions and sales contests, it is not unusual to see additional prizes and awards as incentives.

Example:

Client A referred by Bob the Broker factors $100,000 in invoices each month.  The factor’s fee rate is 2.75% for 30 days or in other words, during a 30 day period, the factor earns $2750 in fees.  Depending on the broker’s commission rate, the referring broker earns…

  • 10% COMMISSION RATE:  $275.00 per month ($3,300 annually)
  • 12.5% COMMISSION RATE:  $343.75 per month ($4,125 annually)
  • 15% COMMISSION RATE:  $412.50 per month ($4,950 annually)

Residual Commissions / Life of Account

As shown above, commissions paid by factors to individual brokers are residual.  This means the broker will be paid the appropriate percentage of the factor’s fees every month as invoices are bought and sold and payments collected from customers.  Additionally, they are paid for the life of the account.  It is common for a client to utilize the services of it’s factor for 3 years, 5 years, 7 years, or even longer. This means the total income from a single small factoring client can total $20,000, $30,000, $40,000 or even more.

How You Will Receive Your Commissions

Once you have referred a client to IACFB and it is successfully funded, you will begin receiving commission checks or ACH transfers monthly.  These are received on or before the 15th of the month after the previous month’s invoice collections.  You can find out more regarding the lucrative commission income available in factoring in this article in the magazine.

Bonus Commission Programs at IACFB Wholesale Operations

Wholesale Operations is IACFB’s support program for members and is a method utilizing IACFB’s 30 years of experience to assist you in bringing in the business.  Using IACFB to assist you in placing your deals with our group of banks and factors means that more of your deals will find homes, be funded, and your productivity will increase exponentially.  With commission rates to brokers of 10 percent plus bonus awards and prizes, few others in the industry can compete with our broker assistance and placement services available exclusively to IACFB members.