About Commercial Finance Consulting

Consulting in Commercial Finance is a unique profession in which independent

agents or brokers serve the general small business community by assisting owners /
entrepreneurs in their search for business finance solutions when traditional bank
lending is not available. Although well practiced in Europe, few have discovered this
unique vocation in the United States where competition in todays economy remains
relatively minimal.
Commercial Finance Consultants (CFCs) are commonly referred to as factoring
brokers, due to their almost singular focus on commercial factoring as a ready
financing tool, and tend to come from all walks of life. And, whereas part-time
practitioners often come from such business service related professions as accounting,
insurance, business brokerage, the real estate and mortgage industry and others, full
time CFC career-seekers tend to be simply entrepreneurial individuals that have
discovered this exceptional profession and subsequently invested the time and energy
to gain the considerable financing expertise necessary to provide the service and excel
in the industry.

Rapidly Growing Need

It is no secret that banks are not lending and small business in the United
States continues to have extreme difficulty in accessing working capital. This problem
is exacerbated by the fact that the primary historical sources of startup working capital
can no longer be counted upon to provide the resource. These include:
Equity in a Home: Though real estate values have partially recovered in
some markets, large amounts of equity in family residences seldom exists.
And even when a small amount of equity does exist, very few banks will
lend against it.
Credit Cards: For most, the ability to access credit cards is very limited.
Usually, the start of a new business means the entrepreneur has lost his or
her job making the application for additional credit difficult at best.

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 Friends and Family: Another traditional source for startup working capital
which is clearly not as accessible as in the past, many making up this group
friends and live in fear of losing their own job or are under severe financial
stress.
Historically, small business entrepreneurs have utilized community banks for
micro-business loans as their working capital needs grew along with their companies.
Those days are no more. Currently, of the nations roughly 8,000 banks and thrifts,
nearly 900 are still operating under severe distress and with capital limitations. It is
estimated that a large number of such Zombie Banks will not survive the continuing
economic downturn.

And the Real Downturn Continues

Clearly, there is little good economic news coming from Washington. While
the current administration arguably entered the economy at a terrible time, it has also
proven to be completely incapable of turning the economy around and launching it into
true recovery. The Federal Reserve has literally exhausted its economic priming
capabilities including endless rounds of quantitative easing, record low mortgage
interest rates, expanding the purchase of asset classes and making low interest loans
to banks. Nothing has worked. Entitlement spending continues to grow, deficits
persist and balloon, and it seems little can be done to stop it.
While official jobs data shows just
over 5.5% unemployment, a truer picture can
be had by taking into account those that have
simply stopped looking which would reflect a
dramatically higher number. Add in those that
have taken part-time employment just to
survive and you will find the real number still
well over 10%. And though the most recent
monthly jobs report showed nearly 300,000
jobs being created, over one half of that
amount reflected increases in very poor
paying minimal wage jobs including those in
the food and beverage industry. For those in
the know, the real jobs picture can be
evidenced in a single statistic. Americans no
longer in the labor force is now at an all time
high with 92.9 million individuals no longer
counted in unemployment calculations. With a
labor force participation rate of just over 62%,
this now ties the record set back in 1978.
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The Growing Trend Towards Entrepreneurism

Because of the continued disintegration in the jobs market, more and more
small businesses are being started out of necessity. Entrepreneurism is beginning to
boom. Many of todays budding entrepreneurs are opening new businesses in the
service sector due to the relatively low cost of entry. Janitorial services, lawn care and
maintenance companies, staffing companies, guard services, general exterior building
maintenance companies, etc. all are attracting new entrepreneurs that manage to raise
the capital to open the doors. What few such start ups foresee, however, is the need
for expansion and operating capital once the venture gets off the ground. Without
access to such capital, many of these infant ventures are doomed to failure. Since
banks are not lending, the question arises, Where can such funds be accessed?

Alternative Commercial Finance

For most new entrepreneurial business start ups in todays economy, the need
for some knowledge of financing options is essential. Many new business owners
know little about the alternative commercial finance industry and the many financing
options available to them. Whats more, most banks do not offer such alternatives as a
matter of their day-to-day business and their loan officers lack the knowledge for
customer referral to the proper
specialized lender.
Alternative Commercial
Finance (known as ACF) does not
provide the seed funds or
grubstake money necessary to
initially start a business venture.
Instead, it focuses heavily on the
working capital needs of a
business after it is up and
operating and has established its
first customers and sales. It will,
for example, finance customer
sales when 30, 45, or 60 day terms
of payment have been offered,
provide capital for inventory and
inventory replacement, insure
export and cross-border sales,
finance payroll, and provide
funding for equipment. It is almost
always asset-based and often
does not require the personal
guarantee of the borrower.
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One of the strongest characteristics of ACF is its broad and ready availability
to small business. For owners and entrepreneurs, gaining knowledge in this critical
area of commercial finance can often mean the difference between the success or
failure of their business.

Primary ACF Focus Areas

While the total operating areas and spectrum of services offered to small
business through Alternative Commercial Finance are too numerous to be adequately
covered in this short article, the most popular areas and most broadly accessed are as
follows:
Factoring: The day-to-day purchase of the accounts receivable of a
business, factoring is arguably the most powerful source of small business
finance available to new and early stage business owners. Its volume of
purchases is well over $100 billion each year nationwide and is accessible
to even the earliest start ups.
Asset-Based Lending: Loans (typically in the form of a revolving line of
credit) to a business using accounts receivable, inventory, and the
equipment of a business as the collateral.
Purchase Order Finance: Funds
advanced for the actual manufacture of
goods where a firm order for those goods
exists from a strong, creditworthy customer.
When used in import-export trade, a
purchase order finance company will post
letters of credit for the benefit of an
offshore manufacturer and oversee the
delivery and shipment of the goods to the
end customer.
Merchant Cash Advance: An advance of
working capital based on the anticipated
receipt of future credit card sales.
Merchant cash is considered expensive but
provides liquidity when other sources of
much needed capital are non-existent.
Typically, the merchant cash advance
company will also be a credit card
processing company.

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There are many other forms of alternative commercial finance with many
pertaining to import export trade. Companies with a focus on payroll finance are a
rapidly growing area currently and while most loan programs of the U. S. Small
Business Administration (SBA) cater to business owners with at least a three year
operating history and reasonable credit, the unique SBA Microloan Program with loans
granted up to $50,000 is an especially attractive source of financing for startups.

Commercial Finance Consulting: The Business of

Becoming an Industry Broker
Though some small business owners will be referred to a proper source of
alternative commercial finance by their banks loan officer or perhaps a CPA, others
will not be that fortunate. That is, unless they luckily stumble upon an enterprising
independent loan broker or, as they are better termed, a Commercial Finance
Consultant (CFC). These modern day small business finance advisors come armed
with an in-depth knowledge of not only alternative commercial finance solutions but
also an exhaustive database of actual financing companies that provide the resource.
CFCs are unique in every aspect. Much like any consultant, they develop a
significant expertise in a variety of industry
areas. They are professional problem
solvers and understand the cash
constraints of small business as well as
the limitations of the banking system when
it comes to granting small business loans.

Consulting

Operating as a Factoring Broker,

for example, is a well known and practiced
profession in Europe but such consultants
in the U.S. are relatively unknown. True
full time industry professionals are, in fact,
exceptionally rare. Though a Yahoo
HotJobs article recently uncovered this
profession , giving it a Top 10 rating on
its Hot Professions List, few article
readers would be able to understand
exactly what the profession involves, nor
what is required to enter it successfully.
To be certain, comprehensive
industry training is the Catch22 of
becoming active in the industry. No
college education will prepare you for this
vocation. The best industry training is that
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found on the job while working for a factor or similar lender. To get a job with such a
lender, however, you likely will need experience.
Making a complete career change into the industry can also be daunting simply
from the fact that it will likely take several months before income begins to appear.
That is, if you do everything right. Few are initially prepared to start full time, however,
tending to slowly learn the business and make a transformation while they continue to
earn a living from their current profession.

Earning Industry Commissions and Fees

Consultant compensation in the form of commissions and fees paid for new
client referrals is, by any measure, outstanding in the alternative commercial finance
industry. Asset-based lenders, equipment lessors, and many others pay points at the
closing of the loan, much like a real estate transaction. Typically, such transactions
tend to be large with an average asset-based loan being in the millions of dollars. Five
figure commission checks for such loans are not uncommon.
Factors and purchase order finance companies provide an even more unique
and lucrative compensation arrangement whereby the referring consultant, called the
Broker of Record, is paid a percentage of the fees earned each month by the factor
or PO finance company. This allows brokers to build books of outstanding business
and a develop healthy residual monthly income as they add new clients to their
practice.

TheJeweloftheIndustry
Factoringisaec onatelyknownastheJewel
oftheindustryduetoitsuniquemethodof
brokercompensa onandLifeofAccount
paymentstructurewhichallowsconsultantsto
buildbooksofbusinessandmonthlyincome!

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And, thats not all. Compensation for referred business is very high on a comparative
basis to many other areas of consulting. For example, while a traditional stockbroker,
a well known area of financial consulting, will require $50 to $75 million under
management to earn a six-figure income, a successful commercial finance consultant
that deals heavily in factoring, will need only 5% of that amount or roughly $2 to $3
million.
In addition to being compensated by lenders, many consultants will charge a
small fee to their clients for the consultation work. Hourly rates can typically run
$25 to $40 per hour but a flat rate fee of $100 to $500 is not unusual.

What You Will Need to Get Started

Another attractive characteristic of consulting in factoring and commercial
finance is the minimal amount of capital, equipment, and office materials you will
require to actually launch your consulting business. What is required will vary
markedly based on your current vocational status. Are you entering on a career full
time basis or are you simply attempting to augment your current profession with some
additional commission income? Either way, you will likely have most of what you will
need to enter the industry already which will include:

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a computer (desktop or laptop)

a printer, fax, scanner
a phone system (two line preferable)
a contact relationship management (CRM) system
filing space

The vast majority of those that start out, do so from the convenience of a home office.
In fact, some never leave it. Most true professionals will eventually make the transition
to an office located within a bank building or to an executive suite operation where
they can have access to a receptionist, meeting rooms, and other BIG OFFICE
benefits.

Business Development: Bringing In New Business

How you market your consultancy and how, when, and where you prospect for
new leads and clients will again, be very dependent on whether you enter the industry
on a professional full time basis or are a purely part-time consultant.
For part-time consultants, the business tends to be simply one of networking
and being in the right place at the right time, armed with the knowledge to assist a
cash-strapped business owner. Part-time consultants will focus heavily on word-of-

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mouth marketing and building relationships with others than can send business their
way. They will have a website, publish a monthly newsletter, and spend a significant
amount of time using social media such as Facebook, LinkedIn, and Twitter.
Career oriented full time consultants typically attack the industry more
aggressively. Yes, they will use all of the same marketing weapons of a part-timer but
will also depend heavily on direct mail / cold calling, holding small business seminars /
workshops, and will join multiple organizations such as the local Chamber of
Commerce and fraternal organizations (Rotary, Kiwanis, Lions, etc.). Professional
consultants network heavily with bank lending officers, accounting professionals,
commercial insurance agents, and others that provide services to business owners.

Knowledge and a Professional Look are the Keys to

Success
Regardless of whether you are seeking a completely new vocation or are
simply looking to make some part time additional cash to supplement your existing job,
a successful Factoring Broker / CFC career entry path will require several things:

Knowledge: The most important component to any consultancy is the

working knowledge and
expertise of the consultant.
In other words, you will
not be able to earn
credibility (and fees), if you
dont know your stuff.
Your first task is, therefore,
to acquire an extensive
knowledge of the various
product areas and to also
assemble a database of
product providers.

Communications Skills:
As a consultant, you will
live or die by your ability
to communicate with
prospects for your services. You will need to carefully assess your
communication skills and improve the areas where you are weak.

The Look: You will need to look and act the part of a successful industry
consultant from day one. Financial consulting is a suit and tie business. You
must act and look at least as good as your local banker or, preferably, even
better. You will not only be judged on your expertise and financing skills but
also on youre ability to impress prospective clients with your capabilities.
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Additional Resources
Without question, a career as a consultant in factoring and alternative
commercial finance is not for everyone. Though almost everyone would enjoy the
income and many benefits associated with a successful entry into this unique
vocation, the professional requirements can present a major challenge to many. One
of the first hurdles which will be necessary to overcome will be that of obtaining a
financial products education. Fortunately, this has gotten a bit easier due to the
internet and the enormous amount of educational materials to be found there.
While there are several business opportunity schools offering training in this unique
area, the costs, up to $20,000 for a few days training, can be prohibitive.
For those initially exploring the industry, there is no better way than to become a
part-time factoring broker and no more affordable industry training opportunity than
that found at the IACFB or International Association of Commercial Finance
Brokers (www.iacfb.org). IACFBs Factoring 101 broker training program comes
complete with everything required to enter the industry successfully including an
expansive training guide, supplemental marketing materials (brochure / flyer
templates), and a professionally designed factoring broker website all for under $100
plus website hosting.
Another resource for those initially assessing an industry career can be had
simply by visiting the websites of factors and lenders. As you do so, you will notice
that most will have a tab or link to a Brokers or Referral Page. Spending time on
these sites, investigating a specific lenders financing capabilities and preferences, will
provide you with a greater appreciation as to the overall size of the industry and its
many specialty areas of opportunity. Incredibly, this is a vocation you probably did not
know existed until recently.
Finally, for those with a bent towards a full time career as an Independent
Certified Commercial Finance Consultant, the comprehensive Commercial Finance
Consultant training package offered at Campus IACFB is by far the most affordable
way for true professionals to begin their career. This program provides training in all
areas of commercial finance and includes the indispensable database of financing
sources, the American Directory of Factors and Lenders.

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