What is a Factoring Broker?

Katie Munday
Katie Munday
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Woman posing

A factoring broker, or factoring loan broker, is an individual or business that facilitates the sale of one company’s accounts receivable invoices to a second company. Accounts receivable represent the money that a company is owed for goods and services that have been sold. The process of buying these invoices is called factoring, and those doing the buying are called factors. Factoring allows businesses the opportunity to borrow against money that they expect to receive in the future.

Businesses choose to sell accounts receivable when they no longer wish to maintain the strain of keeping the accounts, which they have to finance. In order to get rid of accounts receivable, they will offer them for sale at a discount. A factoring client can receive immediate cash for its invoices. This can be helpful for a company that is having financial troubles or is simply looking to eliminate capital shortages. Factoring especially works well for businesses that have receivables for large amounts of money.

The process by which accounts receivable are sold is fairly straightforward. A factoring broker might sell them to an open group of buyers or might target specific potential buyers. The broker usually sells the invoices through an auction.

A person can sell factors on either a full-time or part-time basis. To become a factoring broker, one might attend a business college that provides courses on the subject. Many businesses also provide training in the field.

Working as a factoring broker might be appealing to someone who enjoys finance, sales and marketing. A factoring broker’s income varies. There are factoring brokers in any economy, including during times of recession, or financial hardship, when many businesses are looking for financing help.

To find a factoring broker, a client will need to assemble financial information on its company, including, perhaps, accounts receivable reports and customer information. It might be helpful for some general information on the company to be provided as well. A good broker will also help the client to understand what information is needed before accounts receivable can be presented for sale.

When hiring a factoring broker, a company should aim to find someone who is experienced, who has good connections and who has been successful at finding factors for clients in the past. To determine a factoring broker’s history, clients can ask for references and can also ask questions about his or her credentials. References from other businesses can also give clients a good idea of a factoring broker’s professional skill.

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