How do I Find the Right Factor or Invoice Financier for my Business?
How do you go about finding the right factor for your business? What, specifically, should you look for?
First, let us look at the sources from which you might find the ideal factor for your invoices. One way is to use a broker in the business and look for one based on your criteria. The other alternative, of course, is to identify a factor on your own.
If You Intend on Using a Broker…
The common assumption regarding using a broker is that they cost money, which is an added expense. Finding the factor directly would save you this cost. In fact, a majority of brokers do not take a fee from you, the business owner. Rather, they are paid a commission by the factor for bringing them a client. Some brokers may ask for a fee before they find the factor for you. However, this is rare.
The broker’s commission would be a part of the discount earned by the factor. Invariably, the factoring discount you pay will not differ – regardless of whether you meet the factor directly or through a broker. Therefore, you need not let the assumption that brokers charge you money stop you from searching for a factor through a broker. Since brokers have experience in the industry, they can actually save you legwork and money by finding factors that charge the best rates and meet your requirements. Factors also find it convenient to use a broker to locate clients. For one thing, the broker can perform the basic screening to see if the client will match the factor’s criteria, resulting in time and cost savings to the factor as well as the client.
For businesses new to factoring, a broker can be an invaluable contact. Therefore, you can expect a good factoring relationship via the broker’s help. There are websites that list the services of accredited broker consultants like the FBAA or the Finance Brokers Association of Australia at www.financebrokers.com.au where you can look for factoring brokers by area. These associations team up with training organizations that provide courses for finance brokers. Therefore, the first step to using factoring is to find the right broker so that you may have a profitable association.
Once you identify a few brokers in your area, you can check whether they handle accounts receivables, factoring, or receivables funding. You can then get in touch with them to find the factor who matches your needs.
Identify a Factor on Your Own
In case you prefer to look for a factor on your own, a few ways can be effective. The most obvious way is through referrals, where you ask your business associates and friends. They might be able to recommend a factor they are currently using, or point you to someone who knows of one. The advantage here is that you can find out, firsthand, whether the business owner is happy with the factor’s services. Financial associations, banks, or your accountant, are also good sources of referrals. These professionals are likely to have good relationships with other finance professionals and are in a good position to give you sound advice. However, be a bit wary, since not all finance professionals recommend factoring because they are not fully familiar with how it works.
The local Chamber of Commerce as a Referral Source
Another option, when you are trying to find a factor, is through your Yellow Pages. Look under the Factors and Financing categories for a long list. You may even see some advertisements. However, remember that the Yellow Pages are not comprehensive lists because many factors may not feature in the Yellow Pages. This is probably due to the fact that they don’t expect a significant amount of business to result from it.
Then, there is the Internet, of course. Practically everyone turns to the World Wide Web whenever they want any kind of information quickly. You will come across many factors’ websites online with plenty of information about what they do and the industries they focus on. Go to your favourite search engine and search for factoring company, factor, or accounts receivables funding. You will be provided with loads of results and end up spending much time sifting through them. There are also websites that carry lists of factors, by area, enabling you to find one near you. You can sort them by name, industry served, and the like.
Then, there are websites that bring together companies that need funds and companies that provide funds. Although these sites charge the factors a listing fee, the businesses seeking funding usually do not have to pay for listing.
Most websites have an online form to fill out when you approach them. These forms ask for detailed information to assess which factor is the right match for you. Once the form is filled out and submitted, your requirements are circulated among pre-approved factors in your industry so that those interested can get in touch with you.
You will also come across broker websites as you browse online, since quite a few brokers use the Internet to generate leads for their business. These sites are useful to factors, as well, since they can rely on the broker’s experience in matching them to suitable businesses. It saves the factor a lot of time, as the broker does the initial screening and pre-qualification.
Don’t assume that because you have searched and expressed your desire to find a factor, you will be flooded with inquiries. In fact, don’t go around registering at all the sites and letting it be known that you are looking for a factor. Instead, plan how to go about it in advance. Decide whether a broker is better for you or whether you want to find the factor on your own. If you decide to go with a broker, stick to just one. Never tell one broker to find the factor and then go talking to other brokers. You definitely don’t want the same factor presented with your account by several brokers as this does not create a good impression. The factor will not feel enthusiastic about working with you. If the factor knows that you are looking at several factors, then they are likely to lose interest, as they do not want to waste their time, money, and resources doing what other factors are doing. The reason is simple – why invest effort in something where the chances of getting the deal are slim?
Some factors take part in bidding sites. Here, the competition is tough. Some factors prefer not to use these. Thus, if they received your account from two or three brokers, they understand that you are only shopping around, and lose interest.
It may happen that your broker is not successful in finding the right factor for you. If this happens, then focus on one website and check it out thoroughly until you find a factor or are sure that it is of no use to you.