As perhaps the only person in the United States that has served multiple years in ALL 3 possible roles in the Receivables Factoring and Working Capital Industry, I am an avid, outrageously boisterous cheerleader of the Cash Flow -or- "Factoring" Broker.
Those 3 Roles...
- CLIENT : I have been a Client of Factoring (8+ Years)
- EMPLOYEE : Over 9+ Years as a Vice President, Senior Vice President, to Regional Vice President
- BROKER : I am now a Factoring, Working Capital, Purchase Order and Equipment Leasing Intermediary. I must say, I've been missing out! What a great career, and now appreciating it even more than ever, I am here to help YOU also, grow as a Factor Broker.
- Look For Quality Prospects When Possible
- Cash Flow Providers Who Value Brokers
- Stay In Touch With Bankers When They Must Decline Lines Of Credit
- Higher Demand For Working Capital and It's Growing Even Higher
- Go Where You Are Wanted : Work With Receivables Lenders Who Want Your Business
Commercial Finance Brokers, today’s commercial finance environment has changed compared to 5 or even 10 years ago. It is not as easy to help a client today with their cash flow needs as it once was. There are several reasons for this: mostly the market of available providers has shrunk, there are fewer providers today to fund your client’s working capital or purchase order needs, account debtor quality is more challenging, commercial bank credit is tighter, and frankly there are more prospects seeking our services than ever before.
Fewer Factoring and Purchase Companies:
This leaves us wondering, how can we accomplish bigger and greater things, with less resources? As there are fewer providers while still a higher demand from business owners, it offers the temptation for those same providers to decline the less desirable prospects. Factors and purchase order lenders are seeing substantial enough deal flow that they have the ability to cherry-pick the more desirable opportunities. In particular this causes a factoring broker to have to look at multiple providers for a single deal, when before they could rely upon one or two exclusive sources.
Account Debtor Quality More Challenging:
In today’s current market many account debtors who once were a high quality and desirable credit, and whose invoices we would readily factor for working capital, are now they themselves challenged from past economic times. Purchase Order financing for these same companies that once were highly sought after publicly traded, or large closely held corporations with exemplary credit, have seen their own credit rating decline. This creates a challenge when reviewing the account debtor credit quality for a factoring transaction, and in turn makes it difficult for the entire accounts receivable report to be eligible for factoring. This can limit the company’s cash flow financing ability as the solution to poorer account debtor quality is to lower the advance rate or make the receivable ineligible completely.
Partner With Cash Flow Providers Who Value Brokers:
I have seen it too often where factoring companies do not value the incredible benefits that brokers provide.Brokers often are taken for granted, seen as a necessary evil of doing business, and merely a cost factor. This premise I believe is entirely wrong and greatly devalues the hard work and effort that motivated brokers do in our industry. At Midland American Capital and Atlanta Working Capital, we place a high value on our relationships with brokers, and work to respect their diligent efforts to find viable businesses in need of cash flow.
Commercial Bank Credit Tighter:
There is no hidden secret about the stress that commercial banks have undergone in the past seven years. This same stress has tightened many commercial banks’ ability to lend and has restricted small businesses cash flow through traditional lines of credit. The company that once before could easily get a line of credit to meet their working capital needs - today finds itself barely able to get a vehicle loan. Small business in today’s environment is no longer a desirable sector for the vast majority of commercial banks. While it is unfortunate on one hand, it is the same misfortune that creates opportunities for the cash flow industry. We exist to fill in the gaps between where banking leaves off. Because of the products and services that we provide companies have access to working capital through factoring and purchase order financing.
More Small Businesses Seek Factoring & Purchase Order Financing:
There are more companies today seeking factoring and purchase order financing than ever before. This creates a whirlwind of opportunity for the commercial finance broker who has healthy and active providers to send opportunities to. However, Brokers who once only needed to deal with one or two key providers today find themselves sending deals to five or more just to get the same “yes” as before. This can cause great frustration on the part of the factoring broker who simply seeks to get his client’s needs met quickly.
Look For Working Capital Providers That Want Your Business:
Done correctly these things can help form a solid relationship between the factoring and purchase order provider and the cash flow broker, that will give him or her a reliable single source for all of their clients working capital needs. It all starts with aligning yourself with a provider who is excited and engaged in working with both you and your client. I emphasize the word “both”. A factoring or purchase order company must be welcoming to new clients and new brokers alike.