Selling Factoring

Factoring can be a tough pill for prospects to swallow. Selling the idea of factoring to someone who has never heard of factoring can be a tough task. Here are six questions that you can answer that will help prospects understand the following process.

1. How can cash flow services help my business?

Ask the client this simple question, "What would you do if you had access to cash immiately, instead of having to wait 30, 60, 90 days or longer to receive payments from your customers?" Another question to ask is "Did your bank reject your loan application or require you to pledge collateral?" If a client's answer is "yes", your comment would be "I think factoring would be a good option for your business".

2. What is factoring?

Factoring consists of converting  company's accounts receivable into cash by selling invoices to a factor at a discount. This is a valuable financing option for companies who are starting out of those who are experiencing a period of rapid growth. The applicant's own financial history has no bearing on it's qualification. Factoring allows a company to stop worrying about cash flow and start focusing on what matters - operating and growing your business.

3.  What does all of the terminology mean?

Potential clients might have a problem with terminology that is used in the factoring business. Be sure that clients understand the terminology.

4.  How does factoring work?

a) ABC's customer requests goods/services.

b) ABC delivers the goods/performs the service.

c) ABC invoices their customers and sells invoices to factor.

d) Factor advances funds to customer.

e) ABC's customers pay the invoices directly to factor.

f) Upon payment, factor will release the difference between the collected amount and the advance, minus the factor's discount fee.

5. What's in it for me?

Here are some of the benefits;

a) Immediate access to cash upon the sale of valid invoices.

b) No liability on the company's balance sheet.

c) Ability to eliminate unnecessary overhead.

d) Early payment discounts.

e) Leverage off of company's customers' credit.

f) Building the business's credit.

6.  What will my customers think if I start doing business with a factor?

There are a couple of good ways to respond to this question. First, you might want to share is the fact that many of their customers may already be familiar with factoring. Secondly, the customers will most likely view factoring relationship positively because it demonstrates that the company's finances are secure enough to establish a line of credit.