The Language of Factoring – Approaching prospects professionally

One never gets a chance to “recapture” credibility. In working with businesses that need cash, the factoring consultant must display characteristics that instill confidence in the prospect. A professional approach requires a business-like appearance (if meeting with the individual), information gathering skills and knowledge about the financing process being proposed.

Many of our consultants are located nationwide, and quite often meet with their prospects. I always advise our referral sources to ask themselves the question; “what is the prospect expecting to see?” In finance there is only one answer; “a banker.” Irrespective of the fact that we are not bankers, we must meet the expectations of the person we are going to see. As unpopular as it may seem, appearance does make a difference. Conservative dress, limited jewelry and being on time are the basic foundations for instilling the initial confidence in your prospect that you are a financial professional.

Information is what you are trying to gather in order to make sure that the product you have in mind is appropriate. A very professional approach to this process is to have a basic “factoring qualifications” list that you can access right in front of your prospect. Begin the process by informing your potential client that you have some basic questions to address with him/her. The questionnaire should be industry specific to what that person sells or the service provided. Don’t ask a doctor for terms on his invoices, for example. If you accomplished the appearance requirement spoken about previously, asking sensitive questions that have to do with financial issues in that particular business will not be an obstacle. You will have gained the credibility as a “banker” to address such items. Get all the facts, so go through your questionnaire in detail prior to the interview to make sure everything is addressed.

The final area that sustains your credibility is your solid understanding of the financial product you will be recommending. Assuming that the questionnaire has qualified the prospect for factoring, you should now be able to explain the product in a way that shows your familiarity and comfort with factoring. Additionally your explanation should also include terms used by your prospect in his/her industry. If you show weakness in either of these two areas, that will chip away from your credibility. Your goal is to reflect that you know your prospect’s business (at least to an industry level) and you certainly know yours. The following are the common pitfalls.

1. Establish factoring as the sale of an asset and not as a loan. Always refer to the process in your detailed analysis as selling invoices. For example you may discuss how some clients use factoring weekly and “sell’ their invoices every Thursday to meet payroll on Friday.
2. Always remember that the cost of factoring is the Discount Fee (keep away from interest rate discussions). For example, “Mr. Jones, as we discussed before the cost of factoring is a modest discount on the sale of your invoice that you will give to the factor as their fee.” Or, “your discount fee will be based on the amount of time it takes for your invoice to pay once we have advanced our initial payment to you.”
3. Describing the process accurately is also vital. I usually describe it as follows. “Once you preset an invoice for sale, and we verify it, we will wire to your operating account 80% of the invoice value as our down payment on the invoice. Once the debtor pays, we wire into your account the balance of the invoice value (assuming that the invoice was paid in total), less the discount fee earned by the factor (calculated from the total amount of days that it took to be paid).”
4. Industry specific familiarity is the last piece of the puzzle. In talking with a medical professional for example, invoices are “claims;” claim value is “net realizable amount;” debtors are “carriers;” payments are “reimbursements.” Other industries, to name a few that have their own language are trucking and construction. Always prepare for the presentation and learn the “lingo.”Your prospect will have to make a serious business decision concerning a finance strategy which in most cases is very unfamiliar. Making sure that you lend as much credibility and confidence to the equation will ease the process and very often will close the transaction!