The Deal Broker’s Guide: 5 Key Questions to Assess Invoice Factoring for Your Clients

Are cash flow issues hindering your client’s business growth? As a deal broker, you help clients find financial solutions that keep their operations running smoothly. Invoice factoring is an excellent alternative to banking that provides immediate working capital by converting unpaid invoices into cash.

Here are five key questions to ask your client to determine if invoice factoring is the right financial fit for them:

1. Do You Have Outstanding Invoices with Creditworthy Customers?

Invoice factoring relies on the quality of your client’s receivables. If their customers have a strong credit history and consistently pay on time, they may be a good candidate for factoring. Factoring companies assess risk based on the customers’ ability to pay rather than the client’s creditworthiness.

2. Are Late Payments or Long Payment Terms Impacting Your Cash Flow?

Businesses operating in industries where customers take 30, 60, or even 90 days to pay often face significant cash flow gaps. Factoring provides immediate cash, eliminating the wait time and helping companies cover payroll, inventory, and daily expenses.

3. Do You Need Ongoing Cash Flow Support or a One-Time Solution?

Some businesses require consistent cash flow to sustain operations, while others may need a short-term solution to cover a specific gap. Understanding whether your client needs a long-term factoring relationship or a temporary fix can help determine the best financial strategy.

4. Are You Aware of the Costs Associated with Factoring?

While invoice factoring provides fast access to cash, it comes with fees typically ranging from 1% to 5% of the invoice amount. Ensuring your client understands this cost-benefit trade-off will help them make an informed decision.

5. Would You Benefit from Additional Back-Office Support?

Many factoring companies offer value-added services such as accounts receivable management and collections. If your client lacks a strong credit control process, factoring can provide both funding and operational support, making it a strategic business decision.

Conclusion

Invoice factoring is a flexible and effective financing solution for businesses facing cash flow challenges. By asking these five essential questions, you can determine whether factoring aligns with your client’s financial needs. If they qualify, connecting them with a reputable factoring company will ensure they secure the working capital needed to grow and thrive.