Factoring Brokers – what should they do to earn their money

I had a call this morning from someone who having read my website and blog wanted to check that the factoring company that they were about to sign up with were OK.

Chatting to the prospect it turns out that he had used a well known high profile “broker” who had supplied him with a list of factoring companies for him to contact including Bibby, Lloyds TSB, Hitachi and two others whose names he had forgotten.

I was rather surprised as I thought that the whole idea of using a broker was for them to source the best deal for the company and not just to give them a list of companies with no added value at all and I doubt whether the factoring companies themselves will work hard to win a deal and offer the most competitive terms if they are aware that every time they get a lead from this “broker” that half a dozen others have also touched it.

4 thoughts on “Factoring Brokers – what should they do to earn their money”

  1. Hi Ian,

    This is the first time i have commeneted on your blog, but i do feel strongly about the comment you have made regarding “brokers” or what you should have said was “telephoone brokers”, i have been in the industery now for some 20 years and i would consider myself to be a “facilitator of Invoice Fiance” my added value to the prospect in any transaction is that i go out to visit them once they have passed my “telephone factfind” and i ask them to have all the relevant information available for me to look at their “cash flow issues” and help identify both the required need and the individual “Finance Partner” i recomend that is most suitable for the solution, what you describe above means two things to me an unprofessional attitude to allow “Dutch auctions” to take place which in turn provide the prospect with a service that does not warrant the premium paid and he finds this out very soon as the deal is “price driven” without the necessary consideration of the required service, the only winner in this is the “telephone broker” who first of all finds it difficult to remember who he has introduced to the prospect, because their are so many, and believes that by doing this he cant lose with commission earned from whoerver “does the deal”

    I have no hesitation or problem having to demonstrate to the prospect my financial reward for the “added value” i provide in the financial transaction, furthermore i speak to my nominated “finance partners” at least once a day to up-date myself with any chance in criteria or additional products that may benefit any prospects that i am currently dealing with, for me thats how a professional Invoice Finance advisor should operate.

    Steve Dunleavy

  2. Hi Steve – I do have a bee in my bonnet about “brokers” who are little more than lead generators as the customer has no idea whether or not he is getting sound and unbiased advice and often assume that he is, when in fact he isn’t.

    I have written before about the ineptitude of certain members of our profession including the company that recommended GE Commercial Finance to a startup recruitment company looking for back office or about the chap boasting on his website about the huge deal that he had just tied up with a factoring company who’s parent had just had their shares suspended and was in possible danger of going bust.

  3. I came across another site today which I’d previously not heard of and these people claim to offer the “best service on the internet”

    On each page of their website is a graphic titled “Get an Instant Quote” which leads to a page asking a few simple questions plus the statement “Please enter your Company Information Below, and we will pass it to the right lenders for you. You will normally receive quotes within 24 hours”

    Obviously “instant” means something different in Lancashire 🙂

  4. I agree with both of you.

    There are definitely brokers out there who simply generate leads. I also believe that some brokers, some of whom are high profile brokers, allocate deals based on what they get back from lenders. I am not only talking about commissions but also insolvency work and survey/audit work. Then you have the obvious issue of a major broker actually being owned by a major independent factoring company.

    There are however a lot of good brokers out there who take time to understand a proposal/requirement and introduce lenders who can genuinely assist. I think it is also important to negotiate fair pricing on behalf of a client and explain all the costs involved as well as the security implications.

    In terms of an instant quote taking 24 hours I can see your point but I think there are bigger issues to be targeted.

    In fairness I have no doubt you are both very good client focussed brokers and I am not disagreeing with either of you.

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