The primary initial role a factoring broker must serve is as an “Educator”. First, you must educate the prospect about factoring, invoice funding, po financing, accounts receivable factoring. Understand the business problems your prospect is facing and explain how factoring may solve those problems. Assume the prospect knows nothing about factoring; don’t forget, factoring is a foreign, and often scary, concept to many entrepreneurs. Slowly walk the prospect through the benefits of factoring, with particular emphasis on the impact the benefits will have on his business. Also explain the logistics of factoring and what the factor is likely to expect of him.

You also must educate the factor. In order for the factor to make an intelligent decision about whether or not your prospect is qualified and, if so, what rates to charge, he must have as much relevant information as possible. This includes information about any liens the prospect may have, outstanding loans, invoice size, customers, billing methods, etc. It means that you must put on your “Detective’s” hat and dig for information that will help the factor make an informed decision. The factoring company will ultimately uncover this information, but the sooner all the facts are on the table, the faster the deal gets funded. That way everyone will avoid wasting time, energy and money on unqualified deals. Once you learn the facts, you must educate the factor about all the details you’ve uncovered.

A broker plays another very important role as the “Local Representative”. The factor cannot open branch offices in every city and town across the country. And, some business owners do not feel comfortable dealing with a finance company in a far away place (even though we know that all the transactions take place over the phone and fax and by wire transfer anyway). So, you are there in the prospect’s local community to bridge the geographic gap between factor and client, to hold his hand, answer his questions, make him feel more comfortable, and act as a liaison with the factor.

Another role you must play is that of “Problem Solver”. Oftentimes deals get derailed because of problems that arise that the factor cannot overcome. When that happens, you should try to assist the factor and client solve the problem. For instance, if a client has a line of credit with the local bank and the bank has a lien on the client’s accounts receivable, the factor will need to convince that bank to subordinate their lien in favor of the factor in order to proceed with factoring the clients receivables. This is often difficult to do from 1,200 miles away over the phone. You can assist the factor in overcoming this hurdle to factoring by setting a personal appointment with the banker and explaining factoring to him and how it will help your client’s business. Your personal meeting with the banker will go a long way in convincing him that factoring will help his borrower’s financial condition and will, in fact, improve his likelihood of being repaid on his loan.

Finally, you must always act in the role of “Facilitator/Communicator”. Your job is to keep the lines of communication open between factor and client. You want to insure that your client remains happy and continues to factor and you want to make sure that the factor remains happy with the client so that he continues factoring him. This means regular follow-up with both parties. It also means intervening when necessary to clear up any misunderstandings or confusion that may occur. For example, if your client is confused about the reports he receives from the factor and he needs help understanding them, you should volunteer. Otherwise, if he does not understand the reports and he does not get a satisfactory explanation from the factoring company, he will eventually become disillusioned and confused and will cease factoring. This is not beneficial to any party involved.

One word of caution: think long term. If you beat up on the factor to fund a client and you rush him through his due diligence, you may be forcing him to overlook a problem which can rear its head after the client is funded and ruin the deal in its infancy. Let the factor perform his due diligence, explain to the client what the factor is doing, and don’t make unrealistic representations to clients about the time it takes to fund. In other words, for everyone’s benefit, make sure the deal is done right so that the client factors for the long term and so that you don’t hurt your relationship with the factor.

Being a factoring broker requires wearing many hats and serving more than one master. It may at times feel like you’re performing a juggling act, but always remember that the functions you perform are critical both to the factor and to the client. And once you perfect this juggling act, you can reap the financial benefits that accompany it.

I have one of the toughest roles in invoice factoring and purchase order financing. I do the underwriting for Paragon Financial Group. Cash Flow Consultants love me when I approve their deal but often misconceive me as the bad guy when I decline their prospect. However, after over 13 years in factoring, I know what can be factored, and which deals to pass on. This has been learned through my making many mistakes over the years as well as good decisions. This is the less glamorous side of factoring but perhaps the most important one.