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, will 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.
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.