Just as banks have Loan Officers to bring in business, factors employ in-house Business Development Officers to source new clients for the factoring firm. Unlike banks, however, factors also actively solicit referral business from active industry freelance specialists called freelance brokers. There are many types or kinds of brokers in the industry with some operating full time and others just a few hours a week. No matter how they choose to operate, factoring brokers are compensated handsomely for their referrals through a unique commission arrangement that features residual monthly life of account payments. It is one of the most lucrative niches to be found in freelance consulting.
Factoring brokers are a type of loan broker or commercial finance consultant. Simply put however, a factoring broker focuses almost exclusively on the factoring product rather than the broader array of small business finance tools found in what is termed alternative commercial finance.
A factoring broker is a person that acts as a middleman “referrer” in establishing a factoring arrangement between a client (the business owner) and the factor (the finance company). Much like in affiliate marketing, a factoring broker introduces a prospective buyer (a new business client) to a factor (the provider of financing services). For their referrals, factoring brokers are paid a referral fee in the form of a commission. Unlike typical banks that seldom have a referral program, almost all factors seek out individuals that can refer new clients their way. For their referrals, factors pay near-legendary commissions which are both residual and also paid for the life of the account.
In the factoring industry, roughly 50% of all new business comes through the doors as a result of a referral. And to expand their business, in-house sales personnel of a factor (called Business Development Officers or BDO’s for short) are always seeking to build expansive referral networks of “referrers”. The primary focus group of building a referral network is bank lending officers who refer bank customer to factors when the bank itself cannot satisfy the loan requirements of business customers. But another key and highly productive component of their referral networks are independent factoring brokers who have discovered this very unique niche consulting business and participate in it on a career-oriented, professional or semi-professional basis. It is a relatively easy field to enter and the great news is that there are no professional licenses required to be a successful factoring broker.
Another appealing feature, when it comes to being a factoring broker, is that there is no educational requirement or certifications needed to begin submitting deals and earning commissions. None! Education and training is strictly optional but getting professional training will obviously dramatically enhance your ability to recognize opportunities and locate quality clients and will greatly shorten the time required to become an industry success.
Another attractive feature of this unique vocation is the relative lack of competition. Here we are talking about those that are career-oriented professional factoring consultants. The business of “factoring broker” as well as the more expansive loan brokering (commercial finance consulting), is still a home-business opportunity that is well under-the-radar and unknown by most. As a professional consultant attending events such as those sponsored by your local Chamber of Commerce, you will be a stand out and will seldom meet anyone else working in your field.
Though sourcing business leads for factors and their BDOs can actually be done effectively strictly from a home office, most factoring brokers and commercial finance consultants tend to be face-to-face networkers as well and attend all types of small business events in their city of residence as well as other cities within driving distance. Here, they will network with and build relationships with prospective clients and also lending officers, accounting professionals, and others that can refer business to them. Make no mistake, this is a highly professional, suit and tie business where you, as a factoring broker or loan consultant are a very highly regarded professional and accepted among all others. Your knowledge of factoring, along with other types of alternative commercial finance products is the key to that acceptance.
Networking, and especially face-to-face networking, is a primary method of generating high quality leads that can be sent to your factor’s BDO for closing…and…will earn you a residual, life-of-account commission as a broker-of-record. Successful industry brokers never miss an opportunity for face-to-face networking at events such as Chamber of Commerce after-hours meet ups.