How To Make Millions As A Factoring Broker

In business, most transactions are done on credit. This increases the bulk of receivable invoices for business, which is unprofitable for business operation. Business owners are looking for who will buy these receivables with cash at a discount. This create easy cash flow for the business, while the factoring business makes profit from fees and interest charge. Factoring is the sale of accounts receivable at a discount in exchange for immediate cash.

How Do You Make Money?

There are two major sources of income in this line of business. They are:

1. Interest Charge
Interest Charge = Receivable Invoice Value - Cash paid
The difference between the receivable invoice balance and cash paid amounts to the profit.

2. Fees
Fees charged for services offered. Some of which are management fee, commitment fee etc. Fees are determined based on your industry, the credit worthiness of your customers, how quickly your invoices turn, and monthly factoring volume.

Let me explain with an illustration. Imaging, Jack(a wholesaler) bought goods worth N100million from Albaco Ltd on credit, with a promise to pay in three months time. In a situation where Albaco Ltd encounters a short fall in its cash flow and has to augment for more inflow. Albaco can sell off its receivable invoice to Intrust Ltd(a factoring company) at the rate of 20%. That means Intrust will pay Albaco Ltd only 80% of the total value of the invoice, which will amount to N80million. Intrust td charges 20% for factoring the debt, which amounts for N20million.

Although volatile, but it's a business that fetches in lots of profit in a short run. A good understanding of the business will guarantee safety. That knowledge is what I am sharing with you here.

Business Attraction

This is a business that is always needed. You are providing outstanding services in a sector that is not too crowded. When you factor invoices, you are helping businesses in accessing an alternative to loan or equity financing, accessing unlimited working capital, fast track access to funding and reducing cost. Your business will always be relevant.

Seek A Thorough Knowledge of The Business.
You may need to acquire financial intelligence from experts. This is very important for this line of trade, especially if you don't have a business or financial background.

Secure Necessary License And Permit.

Get a suitable location.
This shouldn't be in the corner of the town. Be in the heart of the city. Align yourself where the business is. You need to be rightly positioned. Lease a suitable office space. Make it comfortable for your staffs and prospecting clients. Invest in file cabinets, computers and other necessary tools that will make your operation effective.



Draft Contracts. Seek legal advice if you are not a lawyer. Operate by industry standard.

Determine payment arrangement. establish who pays you from the start of each transaction, either the customer or the seller of the debt.

Double check invoice for validity.

Check out the reputation of the customers and business owners. They must be people and businesses of integrity. It's easy to lose your money. Conduct thorough investigation.

Invest in a good website. It will enhance your business visibility.

Attend business functions, connect with potential customers and businesses. Be visible.

When in short of running cost, approach the banks. They will be willing to offer financing.

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