There are many different types of factoring broker although to those outside the industry they may all seem to be much of a muchness to the casual observer but that is actually not the case at all as there are quite a few different types of factoring and invoice discounting broker with the genuine independent specialist now being in a small minority.
The various types of broker can be categorised as follows:-
Factoring Lead Generators
Many so called factoring brokers are actually little more than lead generators with little if any knowledge of factoring or indeed the nuances between each individual factoring company.
This type of broker tends to be internet based and utilizes the expertise of the owner in web design and search engine optimization in order to give their web site visibility in the search engines.
Most of these websites are software driven rather than people driven and offer invitations to fill in forms whereupon the company will contact you later with factoring quotes from one or more invoice finance company.
If that wasn’t bad enough many of these so called brokers are actually the same company operating under a variety of names with previously independent brokers now acting as affiliates to them.
The disadvantage of using these lead generators is that with the best will in the world software cannot differentiate between the operational vagaries of the various factoring companies and that can only be done by dealing with real experienced human beings and not software.
Jack of All Trades Broker
When the National Association of Commercial Finance Brokers announced that it’s members had seen a large drop in the amounts of traditional commercial finance business that they were placing it was suggested that the members should try and increase the amount of broking business that they place by getting involved in the factoring and invoice discounting markets despite not knowing much about it purely as it seemed to be a growth area.
Invoice finance isn’t like commercial mortgages or business loans or asset finance where rate is everything as there is a large amount of service involved and with the best will in the world some factoring companies don’t perform to the levels of the market leaders in terms of the service levels and the involvement of general commercial finance brokers is not necessarily in the best interests of the client.
Insolvency Practitioner Owned Broker
Whilst factoring broker outfits owned by insolvency practitioners were unheard of a couple of decades ago this has been a huge growth area in recent years as the insolvency profession have tried to carve out for themselves a larger slice of the insolvency pie from the factoring companies by introducing leads for new clients in exchange for lucrative insolvency work. Unfortunately this often means that new clients are introduced to the factoring company more likely to benefit the themselves than the client himself.
The market leader is Touch Financial Services which is actually part of the SFP Group of insolvency practitioners which works closely with many of the independent factoring companies but they seem to have diversified in recent years as according to the Feefo ratings on their website many seem to be for finding an accountant
Yet another supposed broking outfit is owned by a leading insolvency firm but not only is this not mentioned on their website but there is no address either with just a Freephone telephone number given as contact details which Google shows is used by a number of other divisions too.
Not only is it bad business practice not to have ownership details on a website but it’s also illegal yet one of the best known firms of insolvency practitioners have been getting away with it for years
There are many others but in the main they tend to operate under their parent’s name.
Other Mutual Back Scratching Brokers,
In seeking to diversify several high profile brokers offer other services to factoring companies including acting as internal auditors to their clients and much of this is done on a quid pro quo basis which makes one wonder just how independent they can be when their lucrative auditing work relies on them scratching the factoring companies’ backs by way of introducing new business to them.
In the past Cashflow UK who were previously known as Factoring UK were taken over by Bibby Factors but neglected to make any mention of that on their website for many years and for quite a while claimed to be independent until complaints from the broking community forced them to change to “offering independent advice” which may or may not be true but it’s difficult to believe that Bibby paid money to acquire a broking outfit in order to let them introduce new business to their competitors.
Fortunately the company ended up incorporated into the parent and operated under their name
Other tied brokers include those that are contractually bound to pass all their new business leads to one of the high profile broking outfits.
Specialist Independent Factoring Brokers
Whilst it would be good to be able to say that the genuine independent specialist factoring broker made up a significant proportion of the broker market unfortunately that isn’t the case and the broker who is well versed in the ins and outs of the factoring industry and introduces his clients to the most appropriate factoring company for their needs without fear or favour is actually few and far between and is one of the reasons why the Independent Factoring Brokers Association
Anyone utilising the services of a factoring broker (and there are significant advantages in doing so) should do some research on the broker first. Many claim to be the UK’s leading broker or to have decades of industry experience but that isn’t always true and many of the larger outfits employee people with very little experience of the market at all.
I will finish this last blog post on the subject of factoring brokers by re-iterating that Factoring Solutions is truly independent and has no ties to any factoring company and derives 100% of it’s income from the broking of invoice finance. Dealing with ourselves you will enjoy a personal service with an adviser who prides himself on being highly ethical and professional at all times.
There are no charges for our services as they are free so for an informal, friendly chat with an expert, please contact Factoring Solutions now on 01827 707680.