Brokered Factoring: How Factoring Brokers Work
Brokered factoring routes your invoice factoring request through a broker to a factoring company, which reviews your customers, advances 70%–90% of each invoice and collects when they pay. You sell receivables, so you add no debt.
- ✓One application reaches a factoring company that funds your industry.
- ✓The factoring company decides: it reviews your customers’ credit and signs the agreement with you.
- ✓Your customer pays the factor under a Notice of Assignment, and the factor releases the reserve.
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Message a SpecialistExecutive Summary: Brokered Factoring
What it is: Brokered factoring is invoice factoring arranged through a broker, who refers your business to a factoring company that reviews, approves and funds your B2B invoices.
The numbers: Advance rate: 70%–90% · Approval: Same day on a complete application · Funding: 24 hours once your account is active · Factoring fee: 1%–3% per period · Estimated minimum monthly volume: ~$50,000.
The Fast Facts on Brokered Factoring
What does a factoring broker do?
The short answer is that a factoring broker takes your invoice details, matches your request to a factoring company that funds your industry and sends it on. The factoring company then reviews your customers, approves the account, signs the agreement with you and advances the funds.
Who signs the factoring agreement?
The short answer is the factoring company. When a broker arranges your factoring, the factor that funds your invoices contracts with you directly, sets the advance rate and fee, files the UCC-1 and receives your customers’ payments under the Notice of Assignment for the life of the agreement.
Is brokered factoring a loan?
The short answer is no: brokered factoring is not a loan. Brokered factoring is still invoice factoring: you sell receivables you already earned to the factoring company, so no debt goes on your balance sheet. The broker only connects you with the factor, which advances the cash and collects from your customer.
Why businesses use a factoring broker
Your industry needs a specialist factor
Trucking, staffing, construction and medical receivables each carry their own paperwork: rate confirmations, timesheets, pay applications or payer remittances. A broker sends your request to a factor that already funds that paperwork.
A bank turned you down
Banks underwrite your business credit, collateral and operating history. A factoring company reviews the invoice and the customer who owes it, so a declined loan application rarely decides a factoring request.
You want one application
Comparing factors one by one means repeating the same aging report and customer list. A broker collects them once and sends a complete file, which keeps the same-day approval window intact.
How brokered factoring works
Share your invoices and customers
You send your B2B invoices, an accounts receivable aging report and a customer list. The broker checks that the invoices are B2B, current and undisputed before passing the file on.
The factoring company reviews and approves
The factor reviews your customers’ credit, approves the account in Same day, files the UCC-1 and sends each customer a Notice of Assignment.
You receive the advance and the reserve
Once the account is active, the factor advances 70%–90% of each invoice within 24 hours. When your customer pays, it releases the reserve less its 1%–3% fee.
Questions to ask before you apply
Who will fund my invoices?
Ask which factoring company receives your file and whether it funds your industry. Trucking, staffing and construction factors each read different paperwork, and the wrong match slows approval.
What are the contract terms?
Ask for the advance rate, the fee per period, the reserve, recourse terms and the contract length before you sign. Those terms come from the factoring company, so get them in its agreement.
Which invoices qualify?
Confirm that your invoices are B2B, current and undisputed, and that no other lender holds a UCC-1 on your receivables. Each of those decides eligibility before the advance rate does.
Factoring broker vs. factoring company
| Feature | Factoring Broker | Factoring Company |
|---|---|---|
| Role in the deal | Matches your request to a factoring company and sends the file | Buys your invoices and advances 70%–90% |
| Credit review and approval | None: the factor decides | Reviews your customers and approves in Same day |
| Factoring agreement | Not a party | Signs the agreement with you |
| Who your customer pays | Not involved | Receives payment under the Notice of Assignment |
| UCC-1 filing | None | Files the UCC-1 on your receivables |
Funding scenarios for brokered factoring
Oilfield services firm bridges net-60 terms
- Funding Amount
- $120,000
- Industry
- Oilfield equipment services
- Customer Type
- Regional exploration operator
- Funding Type
- Invoice factoring
- Invoice Terms
- Net-60
- Advance Rate
- 85%
Two crews had to be paid every week while the operator paid on net-60, and the firm’s bank declined a line increase.
The SolutionThe factoring company approved the operator’s credit the same day and advanced 85% on four invoices once the account went active.
Result$102,000 advanced. Payroll for both crews cleared on schedule.
Packaging distributor covers a large order
- Funding Amount
- $210,000
- Industry
- Packaging distribution
- Customer Type
- National grocery chain
- Funding Type
- Invoice factoring
- Invoice Terms
- Net-45
- Advance Rate
- 90%
A grocery chain doubled its order, and the distributor needed cash to restock before the first invoices were paid.
The SolutionInvoices for delivered pallets were factored at 90% within 24 hours of submission on the active account.
Result$189,000 advanced. The distributor restocked and shipped the second order on time.
IT staffing firm funds a new contract
- Funding Amount
- $95,000
- Industry
- IT contract staffing
- Customer Type
- Regional health system
- Funding Type
- Invoice factoring
- Invoice Terms
- Net-30
- Advance Rate
- 90%
A new contract added twelve consultants, and the first client payment would land a month after the first payroll.
The SolutionApproved timesheet invoices were factored weekly at 90% once the account was active.
Result$85,500 advanced across the first month. All twelve consultants were paid on schedule.
Where IFXI arranges invoice factoring
Texas, Florida, New York, Illinois, Georgia, Ohio, and Pennsylvania.
Frequently asked questions about brokered factoring
What is brokered factoring?
Brokered factoring is defined as invoice factoring arranged through a broker, who refers your business to a factoring company. The factoring company reviews your customers’ credit, approves the account, signs the agreement with you and advances 70%–90% of each eligible B2B invoice.
Is a factoring broker the same as a factoring company?
The short answer is no: brokered factoring is not a loan. A factoring broker connects your business with a factoring company and sends your file. The factoring company buys the invoices, reviews your customers, signs the agreement, files the UCC-1 and collects from your customers. The factor decides approval, advance rate and fee.
Who do my customers pay when a broker arranges my factoring?
The short answer is the factoring company. After approval, the factor sends each customer a Notice of Assignment directing payment to it. When the customer pays, the factor releases your reserve less its 1%–3% factoring fee for the time the invoice was open.
How long does brokered factoring take?
The short answer is the same day for approval on a complete application, 2–5 days to close a new account, then funding the same day or within 24 hours once your account is active. A complete file includes your invoices, an accounts receivable aging report and a customer list, and missing paperwork is the most common delay.
What invoices do not qualify for factoring?
The short answer is that B2C invoices, disputed receivables and invoices past due more than 90 days do not qualify. Factoring companies also exclude receivables already pledged under another lender’s UCC-1 and invoices for work you have not yet delivered, whichever broker or factor you use.
General information about brokered factoring. Rates, advance amounts and approval come from IFXI’s lending partner after its review and can change.
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