This “brokered” case study featured a relatively new factoring broker that uncovered this lead through a relatively small direct mail campaign followed by cold calls to recipients. The Florida-based client started this manufacturing business in his garage and had moved to an “Enterprise” area only a few months earlier.
Avid bass fishing pro, Bill “Sawtooth” Snagmaster is well known around the pro bass fishing circuit as adesigner of the world’s finest turbo sinkers. Due to popular demand throughout the pro bass circuit, he began producing his always-in-demand Mag Force Deluxe Turbo Sinkers out of his garage and selling them to other pro fisherman.
One day, to Bill’s surprise, he received a call from a major fishing
equipment retailer, Batfish Bobbers, wanting to order 50,000 turbo sinkers per month (in various popular colors) for its retail chain. Bobbers would pay 50 cents per sinker ($25,000 per month) and the terms of payment required by Bobbers was 60 days.
In spite of running his business from his garage, Bill felt he could easily meet the $25,000 monthly order size and he currently had over 50,000 sinkers in inventory….enough to meet the first order. But, there was a small problem. While he had plenty of inventory for the first order, he would need to order bulk lead, special sinker ferrules, and waterproof color dye for the subsequent two sinker orders if he was to meet the requiredshipping dates. He estimated the cost of these raw materials at about $10,000 per order and this was money Bill simply did not have at hand.
Fortunately for Bill, one of his closest fishing buddies and Mag Force Turbo Sinker fan, Pete, was a freelance factoring broker who worked the fishing circuit looking for opportunities just like this. Pete had already talked to Bill about financing in case he ever landed a big order so it was no surprise when Bill called and explained the situation. Pete immediately concluded that a small factoring arrangement was all Bill needed and quickly set up a conference call that very afternoon with a factor.
To begin the call, Pete made the introduction between Bill and the factor and within just a few minutes, the factor recognized the opportunity and had conditionally approved Snagmaster Turbo Sinkers for factoring. In addition, because of its excellent credit rating, Batfish Bobbers was approved with a credit limit of $200,000 which gave Bill plenty of financial room to increase shipments and order size if required.
ANALYSIS…ACCEPTED: This deal was accepted. Bill was provided with a factoring arrangement featuring an 80% advance, a fee rate of 2.5% for 30 days and just 4.5% total for 60 days. The 80% initial advance on the first invoice purchased provided Snagmasters with $20,000 in immediate funding (80% x $25,000 invoice) so Bill could comfortably order the raw materials for the next orders. More importantly, with the factoring arrangement now in place, Bill could easily handle what he felt would be new orders from other retailers which were competitors of Batfish Bobbers.
As the factoring broker of record, Pete earned a standard monthly referral fee of approximately $340.00 for every month Bill factors. BROKER COMMISSION EARNINGS: $350-$400 per month to start but may grow significantly as Snagmasters attracts new orders from other retailers and competitors of Batfish Bobbers.