One of the primary reasons many are attracted to brokering in the factoring industry is due to the way brokers receive such fees and commissions. As a norm, industry brokers will earn 10% of the factoring fees charged to the client (seller of invoices) by the factor. Most importantly, this arrangement is often for the life of the account. This means once the client is referred and the factor begins to purchase invoices each week, the broker will earn 10% of the factoring fees charged for as
long as the client-factor relationship exists.

Successful industry brokers learn to build “books” of client referrals and, as a result, will receive multiple commission checks each month for their portion of the factoring fees earned on each referred client. Adding to the earnings attractiveness, such extended commission relationships (and monthly checks) can often last for many years.

Entering The Brokering Community
Though some independent loan brokers uncover this lucrative vocation while performing their normal daily job of accounting or bank-lending, many others
discover this unusual career opportunity after being exposed to the cash flow industry and, in particular, the well known product area of discount mortgage notes. In reality, brokering mortgage notes and consulting in factoring and alternative commercial finance have little in common from a business standpoint. However, more factoring consultants are recruited from the ranks of note brokers and the discount mortgage note industry than from any other single source.

While some find entering this unique brokering community difficult, the truth of the matter is success as a factoring and alternative commercial finance broker is really not that hard to achieve once you fully understand the various products and the financial benefits they can provide to cash-strapped small and mid-sized owners.

In addition to factoring, most industry brokers will also offer consulting services in asset-based lending, purchase order finance, import-export trade finance, and equipment leasing as well. While a certain level of product knowledge in all these areas is important, most essential to success in the industry is the ability to develop a “marketer’s” mentality and to acquire the direct marketing and prospecting skills necessary to make the business of brokering commercial finance transactions not only financially rewarding but physically and emotionally enjoyable as well. Successfully entering this challenging area of commercial finance requires acceptable product knowledge, a strong work ethic, and general marketing savvy and is clearly not for everyone. For career minded, success-driven entrepreneurs willing to meet the challenges, few professions offer the combination of prestige, respectability, and income potential as those found in the factoring and alternative commercial finance industry.

Robert McMahon is president of Aegis Factors.

To find out how you can receive inexpensive home study training to become a factoring broker, click here.

While many areas of the paper industry offer career opportunities for the well-informed, few provide the combination of ease of marketing with exceptional commission payout structure as is found in the factoring industry. For career-minded brokers seeking to build a true business in cash flows, factoring remains the "industry jewel" with almost no limitations with regard to success and income potential.

My Introduction to the Industry
In 1982 while a stockbroker at Merrill Lynch, I was on vacation in Las Vegas passing time at a blackjack table trying to make up for (with very little success) what my wife was spending in the shops at Caesar's Palace. At the table with me was a gentleman in his late 50's from the New England area who struck up a conversation during a respite and change of decks. When he asked
me what I did, I proudly replied that I was a stockbroker, and he informed me that he had been a broker for many years on Wall Street. When I asked if he missed the business, he confidently replied, "No, not really. I found something better to do." I then asked what he did, and he told me he was now a broker in the factoring industry.

Over the course of the evening I learned some basics about his business, and what I was quickly losing at the blackjack table was more than offset by the knowledge I was gathering from this highly successful consultant. Most importantly, I learned that while I had made a six-figure income that year as a stockbroker, he had earned over four times my commission as a factoring
consultant. The frosting on the cake was that he was working from his home in the summer, his sailboat in the fall and spring, and then wintered at a different island in the Caribbean each year. Hmmm!

I Meet a Real Factor
Some years later in the early 90's I was at a convention of restoration and remediation contractors in Florida looking for a little business when I saw a gentleman with a name badge which displayed his name and his employer, "American Factors." I quickly went to him and asked if he was a factor, and he replied, “yes.” With that, I literally dragged him into a corner, proceeding to tell him the tale of the factoring broker I had met in Las Vegas nearly ten years
earlier and then asking how I could find out more and get into the industry.

He said he would be happy to send me a "Broker's Package" which would explain a lot about the industry. He said he would also work with me on my first deals to show me the ropes. True to his word, I received a package of materials the next week and became an independent broker for American Factors in the commercial factoring industry.

Setting Up Shop
One of my first tasks was to gather as much information as possible about the industry, and I set out to get as many "Broker's Packages" as possible — not really easy in the early 90's (Al Gore was still working on the Internet), but, nevertheless, I did find about a dozen other factors and received a package of materials from each one. By the time I picked apart all the packages, I had a good working knowledge of the industry, what factors were looking for, and even some samples of marketing materials I could order for direct mail marketing. I rented some office space from an attorney friend, subleased half the space to three court reporters which generated a positive cash flow, and moved in my desk, filing cabinets and equipment. Since I already had a
computer, copy machine and dual line phone / fax system, I was officially in business as a factoring broker. Now, for my first account.

A Second Look at the Business
Still a little green and lacking experience, I begin to take a second look at what factoring actually was. These guys (the factors) simply buy invoices of quality that will pay in 30, 45, or 60 days. They buy from small business owners that need the money now and can't afford to wait. The question then was simply, "Where do I find small business owners that are waiting for payment on invoices that are of high quality?" The answer....Home Depot.

Major retail stores like Home Depot, Lowes, Sears, Target, etc. have lots of products from major manufacturers where waiting 45 to 60 days to receive payment is no big deal. They also, however, have many products from smaller manufacturers and distributors where waiting 45-60 days causes serious cash flow problems. These small operators have weekly payroll, suppliers to
pay, and other expenses that can't be put on hold while the major retailer takes its sweet time to pay. A middle man with cash is needed to finance the invoices, and that middle man is known as a factor.

Finding My First Gold
Armed with a small spiral notebook in hand, I began to walk the aisles at Home Depot every evening looking for unique little products obviously made by small manufacturers. I would gather about 20 names every day, send a piece of mail to each, and then follow up with a cold call in about five to seven days.

My first gold was struck in Florida. It was a manufacturer of aluminum clothesline poles that was waiting over 45 days to receive payment on their Home Depot invoices, and it was causing severe working capital problems due to payroll and supplier payments. I set up a conference call between the company owner, the factor I was working with and myself. The account was opened immediately with a “10% of the fees earned” commission now being paid to me.

Continued Success at "The Depot"
The clothesline pole company was the beginning of several accounts generated from my adventures in walking the aisles at the local Home Depot. The aisle managers were beginning to give me and my little notebook dirty looks, however, so I decided to broaden my marketing mix and place some small classified ads in Thrifty Nickel-style publications and see what I could
uncover.

Major Gold Struck Again
The very first ad I placed brought in a painting contractor that refurbished local apartments when renters moved out. His crews would mask and spray the apartment, repair drywall, re-caulk tubs and showers, etc. and then submit their bill. Because most of the complexes he worked for were owned by large development companies, it was taking up to 60 days to get invoices paid while he was being forced to make payroll each week for his labor.

Factoring proved to be the cash flow answer for his small company and also for mine. Because he was only generating $20,000 per month in invoices, I decided I would provide the factoring for him myself and keep 100% of the fees. I already had copies of factoring contracts and necessary documents, and within an evening I had created some Excel spreadsheets that would act as advance and fee reports. I was making the major (and very early) move from broker to factor. Most importantly, I was going to keep 100% of the factoring fees from this small account which dramatically supplemented my income from straight brokering where I received a standard 10% of the factoring fees earned. While I still brokered most transactions, this was the first small account of many I began to fund internally as I started to build my own micro-
factoring business.

Industry Brokering Today
While over 15 years has passed since I brought in my first account, nothing has changed. If anything, the business of brokering has gotten easier due to the expansion of Al Gore's Internet and the development of sophisticated database / contact management systems to track marketing efforts. Still, many that attempt to enter the industry fail miserably for a variety of reasons. Most have to do with marketing skills (or lack thereof) and simply the inability to stick with the business (usually due to financial reasons) while their skills are developed.

Is This a Career for You?
Could be. Before entering, however, you should answer a few questions honestly:

Do you have a history of jumping from business opportunity to business opportunity looking for a pot of gold? If so, this is clearly not for you. Being a broker in factoring and commercial finance takes hard work and perseverance. True, there are big rewards for success, but it takes time to develop this career.

Do you have the "human assets" necessary to succeed? Take an inventory of your natural abilities and skills.

Do you communicate well with others?

Can you look and dress the part of an executive?

Do you have the capital necessary to sustain you while your business is
developed?

Do you have the "hard assets" necessary to succeed? You will need an office either in the home or an executive suite. You will need a computer with a contact / database manager. You will need a two-line phone system and likely an answering service (not answering machine). You will need a web site. You will need a dependable and reasonably attractive vehicle. To succeed, you will need to have "the look."

How do I get started?
If you've been bitten by the "factoring broker bug," the next step is to become
knowledgeable in the product areas of factoring, purchase order finance, asset-based lending, and import-export trade finance. This is not easy but also not difficult; most importantly, also not expensive. While some seminar “schools” demand fees well in excess of $10,000-$12,000 for several short training sessions, the truth is such money is much better saved for marketing and
living expenses while you bring in your first deals and build your business. In fact complete training, marketing materials, contact management software and support can now be provided inexpensively through programs available from THE PAPER SOURCE.


If you think the business is for you, when starting your business, try to....

Start Small...Start from a home-based office. When you generate your first deals and have reasonable commission income being generated each month, move to an executive suite or small office located within a new bank building. Reinvest your very first commission dollars back into your company.

Concentrate on Lead Generation... Factors will all assist you in closing deals. Focus all of your initial efforts on lead generation. Once you have a qualified lead, set up a conference call between you, the prospect and your factor who will close the deal for you if it is possible.

Utilize Direct Mail and Your Website...Telephone marketing and networking are extremely important areas to develop for success of your overall business. Direct mail is the place to start, however, as you build your networking and telephone skills over time. Use direct mail to "drive"
prospects to your website where they can obtain a FREE booklet, white paper, or report on the benefits of factoring and alternative commercial finance.

Robert McMahon is president of Aegis Factors, Inc.

To find out how you can receive inexpensive home study training to become a factoring broker, click here.