If you have worked in the financial industry for a while and are looking to specialize in a particular field, then factoring may be the right niche for you. Oakland factoring companies buy outstanding accounts receivable from businesses at discounted prices. This process involves accounts that are difficult for businesses to collect. The factoring companies then collect the payments that are owed and make a profit from the commission earned, interest expenses, and fees that are paid. This sounds like a great business opportunity, right?
The process…
Are you looking to start a factoring company? Here are some of the steps that you can follow to turn that into a reality:
- Start slow and learn the ropes
This applies especially if you haven’t been active as a direct funding agent. the best way to start is as a broker or factoring broker first then progress to running your business. It helps to have some degree of familiarity in an industry before investing in it.
- Consider having a part-time factoring business
If you are staring small, doing some part-time tasks will help you learn the ropes and become familiar with the process. This differs when you go the direct funding route. In this case, you will be expected to work late hours to track down invoices and do other things.
Such a venture requires lots of dedication. You will be required to work early mornings, late nights, and during the weekends.
- Market yourself to high-risk businesses
Market your business aggressively towards whatever local industry that you feel is going through a difficult time getting payments in on time. Offer your factoring services and tell them what they stand to gain when they partner with you.
Wherever possible, volunteer to speak about factoring. This will be greatly appreciated and it’ll be a great way to expand your outreach.
- Get a licence for your business
Ensure that the business is licensed as a collection agency. You may also need to be licensed as a financial institution. Some specific certifications are required to obtain this license as well. You will need to be prepared for a general business license, a collection agency license, and other local authorizations. Talk to your local county clerk about what your requirements may be so that you can stay in compliance with your factoring business.
- Find a finance attorney on retainer
Factoring contracts can be a complicated bit of legal paperwork. You will be navigating waters of financial collection that may bring about some high level of risk. One course of factoring has the receiver, your business, sorely responsible for collecting the payments that are owed.
Conclusion
Factoring is a business finance tool that is used by firms to increase cash flow. These companies provide business finance in the form of immediate cash advances. The funds are in exchange for a business’s accounts receivable invoices. In return, the factoring company makes money from interest and fees.
