Factoring brokers earn a commission from factoring companies for clients that they place with them so it makes sense that the less successful brokers that don’t place any business won’t earn any commissions so the less scrupulous brokers have a number of little tricks to help them win deals and thus earn commissions most of which are to the detriment of their client.
Around the turn of century when Factoring Solutions first set out as a specialist invoice finance broker there were very few competitors and in general if we were approached by a prospective client we invariably managed to place the business with the most appropriate factoring company for their needs but times have changed and the broking business is highly competitive nowadays with dozens of newcomers arriving on the scene and many prospective clients approaching more than one broker who are consequently competing with each other and the prospective client is often the loser.
When Factoring Solutions receive an enquiry we discuss the proposal in detail with the client and usually can make a recommendation based on what we have been told but the less scrupulous broker won’t make any recommendation until they have first spoken to a factoring company to ensure that they haven’t received the lead from someone else and so it can be logged down to them.
If they have already received the lead the broker will then contact another factoring company and will continue along this path until they find one that hasn’t already had the lead. How on earth this is supposed to add value to the client is anyone’s guess and the poor company may as well contact factoring companies at random themselves as that is effectively what they are getting from the broker.
The moral of the story is that if you approach a factoring broker and they need time to go away and think about who to recommend you to, they will be acting in their own best interests and not yours.
Another little trick so beloved of many brokers (especially the larger high profile ones) is to suggest that they introduce the prospective client to several factoring companies in order that the client can decide which factor they feel most comfortable with. This is actually a device to ensure that whichever factor wins the broker definitely will. How is a client supposed to decide which factoring company is the most appropriate for their needs when he is just meeting a salesman who won’t tell him about the operational quirks that actually makes his company less suitable.
Why factoring brokers want you to change your factoring company
Factoring companies pay an introductory fee to a broker for each client that they introduce and many factoring brokers try and earn commission by approaching existing clients of factoring companies and trying to persuade them that the grass is greener elsewhere in order to get them to move and thus earn themselves a nice commission.
If it is the same broker trying to engineer the move as it was that introduced them to their existing factor one has to wonder why the factoring company that was supposedly the most suitable one for them a year ago no longer fitted the bill.
Many brokers will keep in contact with the client partly to see if they can sell them other financial products but also to ensure that if the client has any doubts they can whizz them off elsewhere and thus earn more fees.
Factoring Solutions will always tell the prospective client which factoring company they feel is the most appropriate even if they have already been in touch with them. We have also never “churned” any any client from one factoring company to another unless the client has contacted us to say that they are unhappy and would like to change.
The specialist factoring broker that knows which factoring companies live up to their promises and which ones do not.
We only deal with those that do.