Once businesses have made the decision to resort to factoring or receivables finance, the sheer number of available options and market players may be daunting. This is where factoring brokers chime in. How do they intervene and what are the benefits? What aspects should businesses be especially cautious when choosing their factoring brokers?
Factoring brokers, finding you the best match in factoring
Factoring brokers, factor brokers or cash flow consultants as they are sometimes called, charge you for finding the best factoring firm to look after your invoice financing needs. This service comes with several benefits.
How factoring brokers work
These professionals, usually working in agencies, will simply listen to your needs, and within minutes will be able to tell you whether a factoring arrangement can be found. They will review the market and find the best invoice finance firm for your specific requirements, and charge a fee. Contrary to what the name may suggest, they will not restrict themselves to factoring, but will also evaluate invoice discounting options.
Factoring brokerage firms will not only help you find a deal faster, they will also help you find the best deal for your specific needs.
- While a business may spend days or weeks reviewing factoring providers and their offerings, the broker immediately understands the business’s needs and matches them with the right offering from the best provider;
- As brokers understand the concerns of factors, they will also introduce the business, and its financial situation in an accurate and favourable way, so that the client may get the best possible deal;
- Brokers will have read and understood the fine print in the contracts to give the client a precise, honest idea of what he’s signing into, helping the client avoid costly mistakes.
Businesses should look into a few considerations to make sure the cash flow consultants will actually make him save time and find the best deal, instead of wasting his time and money to get him a subpar offering.
Costs of a factoring broker
Cash flow consultants may charge high fees, some charge upfront, some charge only after they have found your match, some will split payments.
On the other hand, some will accept performance-based fees, usually on top of a flat fee, paid only when the client signs a satisfactory factoring deal.
Some brokers may ask for binding contracts, so be sure what you’re heading to when you find an attractive offering.
One of the main benefits of a broker is to find you a good factoring deal quickly. They should be able to tell you during the first serious conversation whether your business qualifies for a possible factoring offer. If they don’t, it will be a negative sign on how quickly they will process your case, or it could even mean they will be happy to take your money even if you can’t objectively find a deal.
Truly independent advice?
This is probably the most important concern one should have when dealing with cash flow consultants. If the brokers have developed special ties with some invoice financing firms, for example, if their agencies are subsidiaries of large commercial banks offering factoring services, or if they get paid to promote some factors over others, they will not give independent advice. The client may miss the best deals.