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Equation for the Perfect Deal Invoice Factoring Deal

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By Phil Cohen

Rather than elaborate on one specific deal that worked out for the better, this article will expand on three surefire attributes all involved parties (brokers, factors and prospects) need to have in order for a factoring  relationship to run smoothly from beginning to end. All it takes is a little preparation, good communication and some organization.



Before a broker even thinks about referring a prospect to a funding source, it’s important for him/her to do some behind-the-scenes prep work ahead of time. Examples of this prep-work include:

  • Knowing all of the pertinent details about each of your funding sources(i.e. Monthly minimums/maximums, industries they serve, general fee structures, length of time it takes to close a deal, how they prefer to receive referrals, etc.)
  • Educating yourself as much as you can about the prospect’s company and/or industry (i.e. Do they provide services or products?, Who are their customers? How much do they bill?, Why do they want to factor? How long have they been in business? Do they have any liens?, etc).
  • Gathering pertinent information from the prospect to help the factor qualify the lead appropriately (i.e. Current invoice aging report, Articles of Incorporation or Articles of Organization, Contact information for company principles, etc.)


Factoring firms also need to be adequately prepared to receive a lead from a broker. This can easily be accomplished by having a structured referral program already in place so brokers know upfront what the factor expects from them. In addition, factoring firms should have dedicated personnel available to help brokers through the process of submitting a prospect.


The best prospects to work with are those who are prepared to answer questions pertaining to their business and who have pertinent business documents on-hand and ready to distribute to the broker and/or factor. For example, most companies should be able to easily access their most recent tax returns, provide financing reports (i.e. invoice aging, profit/loss statement, balance statement, etc.), and supply copies of company registrations.



In order to close a deal and start generating commissions, it’s not enough to send a quick email out of the blue to a funding source with minimal information about a prospect. Factoring firms oftentimes work with a database of hundreds or even thousands of referral sources. Brokers should take the time to check in with a factor every once in a while, regardless of whether they have a “hot lead” to refer, just to keep the communication lines open and get updates on any changes in the factor’s funding programs.


All too often, brokers will refer a deal to a funder, and then they never hear back from the factor on what the final result was. Factoring firms should take the time to update their brokers along the way as the lead progresses into a client. In the even that the prospect does not become a client, a factor should also communicate with the broker to let them know why they didn’t end up qualifying.


Of course, in order for a factoring company to close a deal, the prospect has to be willing to communicate in a timely manner. There have been a number of instances when prospects initially show an interest in factoring their receivables when talking to a broker, but then they go “radio-silent” once the funding source enters the picture. In a perfect world, a prospect is available and willing to communicate openly via phone and/or email.



Organization goes a long way when it comes to building rapport with a prospect. When a potential client is considering alternative ways to finance his/her business, they ideally want to work with someone who will offer a structured cash flow solution. Simple things like returning phone calls and/or emails in a timely manner and taking good notes on what transpired during each conversation are perfect examples of how brokers can stay organized and help things run smoothly.


Much like a broker has to stay on top of his/her game to keep everything straight, the factor’s organizational level has to mimic the broker’s. If an organized broker sends all the necessary information about a prospect to a disorganized factoring firm, then the deal will most likely not get done. Factors should have a successful tracking/follow-up system in place to ensure that the factoring approval process runs in an orderly fashion. Organization leads to quicker turn-around-times which leads to faster funding


When brokers and/or factors find themselves working with a disorganized prospect, it’s usually cause for concern. Sometimes, prospects send in partially-completed documents or illegible paperwork. All this does is slow down the approval process and raise red flags.

When it comes to finalizing a successful factoring relationship, it definitely takes three to tango. Brokers, factors and prospects all have to be willing to cooperate in order for a deal to go live. It’s important for all three parties to be sufficiently prepared, communicate effectively and stay organized throughout the process in order the ensure that all parties are successful in the factoring referral relationship.

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Phil Cohen

About the author

Philip Cohen is the founder and President of PRN Funding, LLC. PRN Funding is an extraordinarily focused niche player in healthcare funding. With years of…... Read More

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