
QUALIFYING a CLIENT for FACTORING
To qualify for factoring, a business must…- do business on a B2B basis and be invoicing customers for goods or services
- invoice customers for goods actually delivered or services actually performed
- have its accounts receivable free and clear from existing liens with no active UCC security interest filings referencing “accounts.”
- a Company Profile (application for factoring)
- an Accounts Receivable Aging Report
- your completed Broker’s Agreement.
COMPLETING the COMPANY PROFILE
Your prospect should complete a Company Profile, which is a PDF document that provides a factor with most of the information required about the business and it’s owner to begin the underwriting process. Among other important items, Company Profiles will provide information to the factor regarding…- Ownership of the business
- Legal business name and structure information
- Legal business address
- Contact information for principals
- Basically, what the business does
- Number of employees
- Business volume
- Invoice balances outstanding
- Existing business loans
- Top 3 or 4 customers based on volume
REQUESTING an ACCOUNTS RECEIVABLE AGING REPORT
An accounts receivable aging report is a report generated by your prospective client’s accounting software and is basically a list of all outstanding invoices in the client’s accounting system. For factors, this is an important document because it lists the names of the client’s customers, provides a snapshot of the volume of business done with each one, and also provides a glimpse at the balance and number of problem invoices (those over 90 days old). You should always provide a copy of the company’s current Accounts Receivable Aging Report aging along with the Company Profile if possible when submitting your deal.DOWNLOADING YOUR BROKER’S AGREEMENT (pdf)
Once you have a qualified prospect who has completed a Company Profile and provided you with a recent aging report, you are ready to submit a deal to your factor of choice. Finding factors is relatively easy with access to the IACFB’s Directory of American Factors and Lenders, and it can also be accomplished with a simple search engine (such as DuckDuckGo.com) search. Search using your geographic area using a search phrase such as “invoice factoring services Dallas.” Substitute the prospect’s geographic location for “Dallas.” It is always a good idea to seek out a factor in the same general area and time zone as your prospect. Visit the factor’s website and check out its funding preferences. There are many niches and specialty areas in the factoring industry and it is very easy to locate factors specializing in a particular industry by using the IACFB’s lenders directories. You’ll want a factor that funds the type of business your prospect is in. After locating a suitable factor, call the factor and ask to speak to a BDO (Business Development Officer). If the receptionist asks for more details, tell her/him you are an independent consultant and would like to refer a new client. If the BDO is available, he/she will likely take your call immediately. If not, leave a voice mail and ask them to call you back. Once you’re connected with the BDO, ask- Does the firm accept broker submissions? If yes…
- What is the commission percentage paid for referrals? If acceptable to you…
- Will the BDO please email you a “Broker’s Agreement”?