Initiating Your First Factoring Deal

15:23 01 February in Blog, Broker Resources

At Capstone, we work closely with our financial brokers to make sure the deal submission process goes as smoothly as possible. We want you to close more deals and build a book of business that will earn residual commissions for many years to come. Getting started is easy.

Here are the steps to follow in initiating your first transaction with Capstone.

Identify a Business Prospect

Identify prospects that do business on a B2B basis and invoice customers for goods or services. Make sure they are in an industry served by Capstone. Prospects can be identified through networking, internet research, and purchased call lists.

Business development is time-consuming so use the methods that are the most successful for identifying a business prospect. Contacts developed through networking are more likely to be successful.

For additional discussion of networking, please read: Tips to Generate Lead Opportunities as a Factoring Broker – Capstone Capital Group (capstonetrade.com)

Initiate Contact with the Business Prospect

The purpose of the initial contact is to introduce yourself, explain the services you provide and determine if there is a need and interest in invoice factoring.

Take notes on the company’s background information so that you can better judge if the prospect is likely to be a good fit for the services being offered.  Here is some information you may want to jot down at this stage.

  • Business name and contact information
  • Description of business activity
  • Sales volume
  • Accounts receivable balance and if they have money tied up in slow-paying accounts receivable
  • Largest 4 or 5 U.S. customers by sales volume
  • The method by which current operations are financed (and amount owed if applicable)

There is other information that will be needed to complete a profile for the prospective client but that can be gathered in the due diligence process after the prospect has been qualified by Capstone.

Avoid Common Factoring Broker Mistakes

Be careful not to get ahead of yourself and start to talk specifics of a factoring program. Capstone will often have to restructure the program you presented. Avoid making misleading statements on topics such as the turnaround of transactions and the length of due diligence and underwriting.

For additional insights on avoiding common factoring broker mistakes, please read: 7 Common Mistakes Factoring Brokers Should Avoid – Capstone Capital Group (capstonetrade.com)

Qualifying the Prospective Client

Request an Accounts Receivable Aging Report and copies of relevant forms used in the prospective client’s business such as a service contract or subcontract. Identify any additional items that Capstone needs at this point.

Make sure that the information needed by Capstone is as complete as possible. This will help to expedite the process of qualifying the prospect.

Schedule an initial phone call with the prospective client, Capstone, and yourself. Capstone will review the documentation and determine if the prospect is a qualified lead.

Beginning the Process

If the prospective client is a qualified lead, have the prospect fill out Capstone’s Application Packet and compile the items listed in the Documents Required Checklist. Forward the completed packet and additional documentation to Capstone.

It is important to follow up with the prospective client to make sure that the packet is completed and additional documentation is provided promptly to avoid delays in the due diligence and underwriting process.

Due Diligence

Upon receipt of the application packet, due diligence material, and due diligence fee, Capstone will begin legal documentation due diligence, account underwriting, and file a UCC-1 lien. Capstone will send an email directly to the new client acknowledging receipt of the due diligence fee and outlining any remaining due diligence items needed.

Proposal or Term Sheet

A favorable review of the application and supporting documentation will result in a proposal (or a Term Sheet if the transaction involves PO financing) being sent to the client.

Seamless Internal Transfer

A call is scheduled for the new client and Capstone to create a seamless internal transfer to make sure transactions will flow smoothly. Capstone will work with the client to ensure that the transmission of documents and modes of communication between the client and Capstone are ready for the first transaction.

Proposal Acceptance

The new client accepts the proposal (or signs and returns the Term Sheet for transactions involving a PO financing facility.)

Contract Preparation

Capstone prepares and sends contracts to the new client for signature for ongoing invoice factoring programs and PO financing facilities. This is not applicable for single invoice “spot” factoring transactions.

Signed Contracts

When the signed contracts are returned and the initial underwriting process has been completed, Capstone will be able to proceed with the first transaction.

Your first transaction with Capstone will flow smoothly when you follow these deal submission steps. Capstone has experienced personnel who will work with you and the prospective client to be sure the qualification, approval, and onboarding processes are handled professionally and efficiently every step of the way.

Capstone has the experience and capability to tailor factoring programs and PO financing facilities to meet your client’s working capital needs and help you close more transactions.



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