A factoring broker makes money by connecting a business that wants to sell accounts receivables, or invoices, at a discount so it can reinvest the proceeds elsewhere, with a buyer for the receivables. The buyer will offer the business a discounted sum after considering the payment history on the receivables, the payer's credit and the value of the receivables.

One reason clients sell their receivables is erosion of buying power. If your client is receiving payments on receivables, those monthly payments will buy much less a few years from now because of inflation, resulting in perhaps a bigger hit than selling the receivable now at a discount. Another reason clients sell is fear that payers might go delinquent or file bankruptcy in the future. If you're considering a career as a factoring broker, do the following:

1. Look into factor brokering for freight companies, which use these services often.

2. Offer clients who need cash an invoice factoring broker service.

3. Start offering a purchase order factoring broker service.

Action Steps
The best contacts and resources to help you get it done

Get paid for matching trucking companies with factoring broker funding sources

One business sector employing factoring is the trucking industry. Trucking companies often need to offer terms to their customers, but find themselves needing to get the money quickly rather than waiting. There are numerous capital sources that will factor these freight receivables and they need your services as a freight factoring broker.

I recommend: Transfac Capital will welcome you as a freight broker and help provide you with a steady income and health insurance. It also will provide advice on how to run your brokering business successfully. Likewise, TranCentral welcomes freight brokers and pays them quickly. It also charges low rates to your factoring broker list of trucking clients, encouraging them to pursue the factoring transaction.

Find funding sources for your invoice factoring broker business

You may have some clients who can't afford to wait 30 or 60 days to receive payment from their customers on invoices for order they have filled. You will find that many funding companies will pay your business to provide factoring broker services, referring invoices to them from clients.

I recommend: Paragon Financial Group will pay your business a referral fee for providing invoice factoring broker services and bringing them clients who wish to sell their invoices. Paragon also has a "broker toolbox" on its website, where you can find factoring broker information and advice such as cold call scripts and advertising tips. OxygenFunding also will pay you a referral fee for bringing them invoices to be factored.

Secure funding sources for your purchase order factoring broker business

When a client has a large purchase order that they can't fulfill because it doesn't have the capital on hand to pay suppliers, the client may seek purchase order factoring services. This differs from invoice factoring, which occurs when the customer's order has already been fulfilled. Funding companies will pay your business to provide factoring broker services, referring purchase orders to them from your clients.

I recommend: Platinum Funding Group welcomes purchase order referrals from factoring brokers and will continue to pay commissions for as long as the client stays with Platinum Funding Group. USA Factoring will pay your business a 10 percent referral fee for your purchase order factoring broker services.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  As a factoring broker provider, obtaining a signed non-circumvent, non-disclosure agreement from each client will legally protect your position as broker on future deals that might happen between that client and the funding source.