Facto
ring
NOTES
Purchase O
rders
LOAN BROKERING
Structured Settlements
Consulting For Profit
Cash flow Industry
Introduction
Chapter One
Career Profile
Life as a Commercial Finance Consultant………. 3
Services in Demand……….. 4
Challenges / Income………... 5
Investment Opportunities………... 6
Personal Qualifications……….. 7
Ingredients for Success……….. 8
Chapter Two
Description of Products and Services
Getting the Job Done………..11Commercial Factoring………... 12
Purchase Order Finance………. 13
Asset-Based Lending………. 14
Equipment Leasing……….15
Discount Mortgage Notes………...16
Business Notes………... 17
Structured Settlements………... 18
Other Paper, products and Services………... 19
Other Services and Products
Chapter Three
Setting Up Your Office
Home Office……….. 23Commercial space………….……… 24
Other Areas of Importance………. 25
Image and Customer Perspective
Chapter Four
Marketing / Prospecting
Direct Marketing & Networking……… 29Relationships, List building & Database Management………. 30
Prospecting, using the Internet & Your company Website……… 31
Promotional Workshops & Seminars……….32
Chapter Five
Getting Started
Training with DataMax……….. 35Website Construction & Hosting Services………36
Questions & Answers Area………... 37
CONTENTS
INTRODUCTION
This guide is designed to provide you with a no-nonsense introduction to the business of consulting in alternative commercial finance or what is commonly referred to as the cash flow industry. It was written by industry professionals with many years of experience in the areas of product knowledge and training as well as marketing and prospecting methods utilized by seasoned industry business development personnel. Most importantly, Consulting for Profit in the Cash Flow Industry was written to address the myths and misconceptions about industry careers which are most commonly proliferated by late night business opportunity specialists and make-a-million-overnight training gurus.
Whether you call it the alternative commercial finance, business paper, or cash flow, the business of becoming a highly compensated industry consultant is multi-faceted, demanding, and, at times, complex. It is a business of polish and sophistication certainly for which not all come prepared. It definitely is not, as the late night business opportunity maestros might tell you, a business that anyone can succeed at. Successful industry brokers and consultants are much sought after and very, very highly compensated. If success in the industry was easy to accomplish and something that anyone could attain, rest assured that everyone would be doing it.
Most certainly, to enter the industry you will need to acquire a significant amount of knowledge about alternative commercial finance and its components such as accounts receivable factoring, purchase order finance, commercial contract finance, export-import trade finance, asset-based lending, and forfaiting. You may also wish to explore alternative consumer financing transactions such as
seller carry-back mortgage notes, owner financed business notes, structured settlement liquidations, mobilehome paper, tax certificates, and lottery / gaming annuities. To become successful, your ability to obtain considerable knowledge about these and many other areas of alternative commercial / consumer financing is essential.
Paramount to your success, however, will be your ability to both market and prospect efficiently and competitively and to generate the sufficient leads, prospects, and ultimately clients which will generate your salary, consulting fees and commissions paid to you from financing sources. As a consultant, you will need to come prepared to network by joining referral organizations such as local
Chambers of Commerce, trade organizations, and fraternal and charitableclubs.
You will need to establish and implement productive lead-generating direct marketing campaigns and efficiently organize and manage each name / lead through the sales process. Most importantly, you must acquire expert prospecting
skills to qualify leads that present quality client potential and to discard the time wasters and information seekers.
There are many other facets of the industry that you need to become familiar with. This guide was created only to introduce you to the necessary concepts, marketing skills, and product knowledge that you must acquire to seriously enter the industry. It is designed to truthfully inform you about industry opportunities and to assist you in making the important career decisions necessary to successfully become a highly compensated consultant in commercial finance.
Robert McMahon
Founder and President Aegis Factors, Incorporated
Experience knowledge business
Sourcing new career challenge
business growth entrepreneur
New skills consulting income
Highly
compensated lucrative
commi
Downsi zing fee
sourcing retrainExperience
knowledge business Sourcing
new new career challenge
business growth entrepreneur
New il professional income
Highly compensated lucrative
eginning your new career as a
consultant in commercial finance
will require a significant amount of
study time and reasonable amount of
start-up capital. One of the most essential steps
when beginning this or any new career is
that you spend some time reflecting on
your goals and the challenges ahead.
Make sure you enter with the industry with
the determination necessary to succeed
and to see it through to the end.
CAREER PROFILE
ONGRATULATIONS! You areexploring the possibilities of a
new career as a consultant in
alternative commercial finance. Many
begin seeking new careers as a result of
corporate downsizing, lack of advance-
ment potential, or simply job loss due to
outsourcing. To be certain, much of the
security that was once a benefit of being
a productive “team player” for large
domestic corporations is a thing of the
past.
More and more jobs are lost each and every day to outsourcing. In “New America”, even state sponsored service sector jobs are now dutifully handled by residents of India, Pakistan, and other areas of the Pacific Rim. Each year, more and more manufacturers find they must relocate production facilities to mainland China or face fierce and insurmountable competition from others that do.
Even those companies that manage to remain competitive without relocation, do so only through downsizing, salary reductions, and employee benefits elimination. Whether you are acting reactively as a result of already experiencing some or all of the above or proactively because you can clearly see that the handwriting is on the wall, you are at the very least, exploring the possibilities of a career move that will allow you to build a lucrative consulting business, enjoy an upscale financially comfortable lifestyle, and take pride in a profession of prestige and distinction.
A career as a consultant / broker in alternative commercial finance can provide a virtually unparalleled standard of living for those equipped for the task and driven by a need for success. Productive professionals will enjoy extraordinary income potential, inherent job security, and the exceptional freedom and flexibility that comes with being your own boss. As an industry consultant, the services you offer are constantly in demand by individuals, small business owners, and large corporations alike.
YOUR SERVICES ARE IN DEMAND
The career opportunity you are exploring, consulting, is one of the most rapidly expanding in business today. Your new area of expertise, however, is one in which few consultants practice. Consultants generally bring their training,, experience, and knowledge to bear to provide solutions to problems where in-house know-how is at a minimum or lacking entirely. For individuals and business owners alike, few areas provide greater mysteries and frustrations that those involving finance. As an alternative commercial finance consultant, companies and individuals may need your help to:
► plan a mortgage liquidation strategy that was necessary to effect the sale of a hard-to-sell home.
► provide financing strategies for an exceptionally large and unforeseen manufacturing order from a new client.
► arrange for letters-of-credit and purchase order finance for a company’s first Pacific Rim manufacturing efforts.
► assist in liquidating a seller carry-back mortgage to help pay for pending medical bills.
► liquidate a structured settlement to generate cash for career re-training.
► provide accounts receivable financing to assist in a corporate restructuring.
► arrange for a lump sum payment on a gambling jack- pot to purchase a new home.
► arrange an inventory revolving line of credit for a company’s seasonal increases in production .
► liquidate a business note from the sale of a previous business to purchase a new one.
► create a commercial financing growth plan for a newly formed small disadvantaged business enterprise.
► source venture capital for the developer of a life saving medical process.
This list represents only a small fraction of the fee-generating opportunities available to financial consultants.
CAREER PROFILE
Accounts receivable
financing and
accounts factoring are
considered the “crown
jewels” of commercial
finance tools due to
their flexibility and
availability to small,
newly formed small
business owners that
do not have access to
INITIAL CHALLENGES
As a new consultant you will face many challenges as you begin your new business venture. As we mentioned previously, if the industry was easy to successfully enter, every-one would be doing it. Below are just a few of the obstacles that you will face as you begin operating as an alternative commercial finance consultant:
Setting up a productive office with the necessary equipment for operation.
Generating your first leads through direct marketing and other lead-generating methods.
Creating a professional web site to assist in your marketing and prospecting campaigns.
Acquiring significant amounts of product knowledge in areas of commercial and consumer finance that are little known to others.
Providing for living expenses while you bring in your first deals.
Developing a state-of-the-art lead and prospect computer-based management system.
Creating strategic alliances for lead referral through networking.
INCOME POTENTIAL
While there will be many challenges for those that chose to enter the industry, the reason that many attempt to do so is the attractiveness of the industry and its considerable income potential. Consider this:
The average stockbroker must manage between $100 and $150 million dollars of investor money (and manage it well) to earn a six-figure income. The average commercial finance consultant must place only $5 million dollars of client accounts receivable with a commercial factor to earn the same amount of commission income or greater.
And that’s not all. In addition to the income potential from commission products, consultants often have opportunities to invest their own funds in exceptionally high yielding
investment opportunities.
CAREER PROFILE
To succeed, you will
need to acquire
significant amounts of
product knowledge in
areas of commercial
and consumer finance.
OPPORTUNITIES for INVESTMENT
Without question, alternative commercial finance consulting offers opportunities that few other vocations can match. Income potential from commissions and consulting fees in excess of $100,000 annually is not out of the norm.
Additionally, however, the industry can often provide its savvy members with exciting opportunities for personal investment and profit. These include unique real estate purchase opportunities, the availability of high yield mortgage notes, commercial invoice purchases with yields in excess of 50%, and fast turnaround payment guarantee purchase order transactions. Among others, typical consultant investment opportunities include:
Factoring….the ability to purchase invoices from small business owners that are payable by their customers in 30 /60/ or 90 days but where immediate capital is required for payroll or other urgent needs. Yields often exceed 50%.
Seller Carry-Back Mortgage Notes….usually offering double digit yields and collateralized by improved real estate or raw land, these longer-term investments can be used as a key component to any investment portfolio where moderate risk with commensurately high returns are appropriate.
Purchase Order Finance….(usually performed in conjunction with factoring) by advancing funds for verifiable purchase orders when vendors are short of cash and can’t take advantage of unforeseen sales opportunities. Yields can often exceed 50% for those armed with the knowledge to structure these common transactions.
Letter of Credit Guarantees….no, you don’t have to be a bank to provide a letter of credit to a business owner. Private letter of credit transactions are becoming common in small business circles and can provide significant yield enhancements to stock, bond, and other more traditional investment portfolios.
The knowledge necessary to structure and benefit from these and other unique investment opportunities is a bi-product of consulting in alternative commercial finance. Many enter the industry for these investment opportunities alone.
CAREER PROFILE
Yields in excess of
50% for those armed
with the knowledge to
structure these
common transactions.
PERSONAL QUALIFICATIONS
Because many individuals make the decision to enter the industry as the result of seeing a middle-of-the-night infomercial from a home business opportunity guru or after attending a “free” seminar, the failure rate for those that subsequently “sample” the business is extremely high. We would guess in the 90%+ range. And, for the third time, we will tell you, if it were easy, everyone would be doing it. It takes a special person with unique entrepre-neurial characteristics, commitment, and qualifications to succeed as a consultant. It takes a very special person equipped with an exceptionally unique compliment of skills, marketing savvy, and product knowledge to succeed as an alternative commercial finance consultant. Before you leap into the industry, consider the following:
A great deal of your time will be spent networking. You should be comfortable around others and have the time and financial capability to join multiple organizations that include bankers, lawyers, real estate professionals and others that can refer business to you.
It often takes many months to begin generating any significant amounts of income. Before entering the industry, make sure your finances are in order. Be sure that you have the ability to stick with it for at least 6 months with little or no significant income.
Even if you work from home, you will have office expenses. Including a computer, you should allocate a minimum of $3,000 for office setup essentials during the startup period.
While you must obtain considerable amounts of product knowledge, your livelihood will depend on your marketing and prospecting capabilities. You will need a reasonable marketing budget of $500 to $1,000 each month just for the essentials.
One of the best methods of developing new accounts is through workshops and seminars. You should feel comfortable speaking in front of groups of twenty or more people.
This is a very prestigious business and you will need to look and dress the part. This includes suits and ties for men, business suits for women and a late model, dependable vehicle.
CAREER PROFILE
It often takes months
to begin generating
significant amounts of
income. Make sure
that you have an
adequate amount of
startup capital to
carry you through the
INGREDIENTS FOR SUCCESS
One major difference between a corporate 9-5 job and a career in consulting is that the business is YOU. Your success or failure, your self esteem, your personal self worth and your level of income all depend on your performance. If you fail, it is all on your shoulders. In the end, there is no one to blame but YOU. Therefore, before embarking on this career path, inventory your personal assets to better determine your chances at success.
Do you have the capital required to start a new business and to provide for you and your family for 6-12 months during the start-up phase?
Do you have the drive and mental toughness that it requires to be independent and fully on your own?
Do you have the computer skills necessary to run the business, keep records, track marketing campaigns and organize leads and prospects?
Do you have the networking skills and time necessary to join fraternal, business, and trade organizations and develop referral relationships?
Do you have a good command of the English language with diction that is easily understood by all?
Do you have good telephone skills that can assist you in your marketing efforts?
Do you enjoy being the center of attention and a problem solver?
Do you capabilities to operate your business during normal 9-5 operating hours?
Do you understand direct marketing and have you any experience in telephone prospecting and cold call canvassing?
Do you have clear cut financial and career goals? Do you have a space available to create a home office work area or the excess capital for commercial executive office space?
CAREER PROFILE
Do you have a good
command of the
English language with
diction that is easily
understood by all?
Purchase order finance invoice
Business notes factoring
Structured settlements deed
Asset-based lending hard money
Accounts receivable forfaiting
Lottery gaming annuities
Purchase order finance invoice
Business notes factoring
Structured settlements deed
Asset-based lending hard money
Accounts receivable forfaiting
Lottery gaming annuities
Factoring purchase orders
ne of the first tasks you must perform
when entering the alternative
commercial finance industry is to
become completely familiar with a vast
array of financial products that may be
completely unknown to you. Many will
have terminologies or “jargon” that you
must become familiar with so that you are
comfortable when speaking with funding
sources and their representatives.
f you are still reading this guide, that means that you believe you have the necessary qualities to
pursue a career as a consultant / broker in alternative commercial finance and are ready to explore the types of products and services that you can offer. We will briefly describe a few of the major products and service areas in this chapter. Keep in mind that new areas emerge literally daily. There are also many tangents available to specialize in as you become proficient in many forms of financing. After providing factoring and purchase order finance for several years to manufacturing clients, for example, one consultant found that she could additional act as a representative between product manufacturers wanting to contract manufacture with Chinese factories, and the factory representatives that arranged such manufacturing facilities. This took no special talent, no additional knowl-edge other than simply knowing where to go to get the job done. (Huge consulting fees involved by the way.)
A key ingredient to this unique consulting business is, in fact, just that…..knowing where to go to get the job done. It is important, for example, that you know the difference between a purchase order and an invoice so that you can contact the appropriate capital source when you are arranging such financing. When dealing in mortgages, you must be aware of the terms of a mortgage…..first mortgage, second mortgage, balloon, etc. so you can present paper for sale and structure transactions professionally and confidently.
How you obtain the necessary product knowledge is another subject. With the continued growth of the internet, virtually everything is available on one web site or another. The key is to know what you are looking for. The topics presented on the following pages are brief introductions to sometimes very complex transactions. To be taking seriously by those that will refer business to you, (bank loan officers, attorneys, CPAs, and other professionals) you must know your business inside out. Professionals such as the above will not risk their reputations on someone that is of questionable authority. As you first build your business, you will need to seek expert training and consultation to avoid making critical mistakes that are sometimes
impossible to correct. As it is often said, you have only one opportunity to make a first impression. Since a great deal of your business will be the result of building referral relationships through networking, make sure your
credentials and base of knowledge are in place and valid.
COMMERCIAL FACTORING
For brokers and consultants, commercial factoring often forms the key component of their product mix. This is because of its broad appeal as a financial “problem solver” to small and mid-size business owners.
Factoring is defined as the process of purchasing invoices from a seller (known as the client) by a buyer (known as the factor). These invoices are purchased at a discount from their face value with an initial advance (usually 75-80 percent) and upon the ultimate payment of the invoice by the client’s customer, the balance of the value not initially advanced is then rebated to the client minus the factor’s fee.
Factoring is one of the most powerful financial tools available to small business. While a financial accommodation, its real value is as a “growth engine” to companies unable to arrange for more typical business loans from commercial banks. Those businesses that employ factoring are able to accept orders for goods or services from larger customers that demand 40, 50 even 60 or 90 day “terms of payment” upon invoices. With the money from advances upon purchased invoices, clients that utilize factoring can provide for weekly payroll, pay their suppliers timely, make tax payments, or satisfy a host of other financial needs. They are not “credit bound” while waiting for slow paying customers to remit payment. Because of this flexibility, they can attract very large commercial clients and grow their businesses quickly and efficiently.
COMMISSIONS
At any given time there are about 1,000 commercial factors operating domestically. Virtually all factors enjoy work-ing with “independent brokers” that source business for them. One of the strongest features of factoring from the consultant’s standpoint is the standard commission fee structure paid for referrals.
Most commonly, factors pay 10% of their earned fees to the broker / consultant that sourced the client. This fee is paid monthly and for the life of the account. Very typically, business owners that choose factoring to finance the growth of their company do so for a period of many years. This means the broker that generated the client can expect a monthly check for 24, 36, 48 months or even longer. By referring only 4-5 million dollars in client invoices to factors, a broker will typically earn in excess of $100,000 per year.
PRODUCTS & SERVICES
By referring only 4-5
million dollars in
client invoices to
factors, a broker will
typically earn in
excess of $100,000
PURCHASE ORDER FINANCE
Commercial purchase order finance literally goes hand-in-hand with factoring. In fact, the vast majority of purchase order finance transactions subsequently result in the creation of a factoring transaction. (earning a double commission for the lucky sourcing consultant)
Purchase order transactions are very similar to factoring transactions. In the case of the purchase order transaction, how-ever, the product or service has not actually been received by the customer yet and an invoice cannot be forwarded for payment. The funds advanced from the purchase order finance company are designated to get the product or service delivered so that it may be invoiced for payment and completed.
Most typically, purchase order transactions involve export-import trade. A contract manufacturer in the U.S. that uses a Chinese factory to produce its product, for example, must pay that foreign factory prior to shipping the goods to its customer. Since the customer does not yet have the goods, an invoice cannot be generated for payment yet.
To finance this transaction, a purchase order finance company will first verify the validity of the purchase order. It will then issue a letter-of-credit guaranteeing payment for the goods after manufactured. Upon notification of the completion of the order by the factory, it will inspect the goods manufactured to be certain they meet specifications. Upon delivery of the goods to a freight forwarder (shipping company), the purchase order financier will then advance funds upon the purchase order directly to the foreign factory’s bank.
COMMISSIONS
As previously mentioned, most purchase order financing ultimately also involves a factoring transaction. When the goods arrive in the U.S. and are delivered to the client’s customer, an invoice can be generated. If the customer was granted 45, 60, or 90 day terms of payment from the time of the order’s receipt, a factor will “take out” the purchase order finance company and finance the transaction for the balance of the time until final payment by the customer. This results in a double commission
being paid to the sourcing broker.
Like factors, purchase order finance companies typically pay 10% of their earned fees as a commission. This amount is paid monthly and for the life of the account.
PRODUCTS & SERVICES
If the customer was
granted 45,60,90 day
terms of payment from
the time of the order’s
receipt, a factor will
“take out” the
pur-chase order finance
company and finance
the transaction until
final payment by the
customer. This results
in a double commission
being paid to the
sourcing broker.
ASSET-BASED LENDING
As opposed to factoring, asset-based lending is provided as a loan to clients against accounts receivable rather than their actual purchase. Additionally, asset-based loans provide
financing for inventory and work in process. Asset-based lending implies a loan that is simply made which is backed by an asset of a business such as equipment (as opposed to a non-collateralized signature loan). This, however, is not the case. Asset-based loans are those loans made to a business which are collateralized only by accounts receivable and inventories (to include work in process).
As opposed to factoring arrangements which can be granted to small businesses with as little as $10,000 to $20,000 in accounts receivable, asset-based credit arrangements usually involve much greater amounts with $1,000,000 or more being more the norm. Because asset-based lenders do not actually purchase the accounts like a factor, the credit of the borrower must be stellar. Asset-based loans, therefore, are only granted to those companies with profitable operational histories and impeccable credit.
Asset-based loans are most often found in the form of revolving lines of credit or as it is commonly termed, a “revolver”. They will include funds for accounts finance, the purchase of inventory, letter of credit transactions, etc. Funds will be withdrawn from the credit line as needed and then re-deposited as accounts are paid and inventories depleted. The borrower generally pays interest only on the funds withdrawn for use with a small fee paid overall for the credit facility’s availability.
COMMISSIONS
As opposed to the recurring and trailing monthly commissions paid for factoring and purchase order transactions, asset-based lenders will typically pay a one time fee for client referral. This generally ranges form 1/4% of the loan amount to perhaps 1/2% for very small loans (under $500,000). Still, even at such low fee rates, a $5,000,000 credit facility granted to a client can often amount to a $25,000 to $35,000 fee to the sourcing agent.
Typically, alternative commercial finance consultants tend to focus their marketing efforts more in the area of factoring, purchase order finance and export-import trade finance where the commission streams are for longer periods of time. The
occasional asset-based loan is look upon as a bonus when discovered.
PRODUCTS & SERVICES
Asset-based loans are
most often found in the
form of revolving lines
of credit or as it is
commonly termed a
EQUIPMENT LEASING
Another opportunity for commission income available to consultants is in area of equipment leasing. Equipment leasing is simply a method of acquiring equipment on a time installment basis rather than purchasing it outright. One of the most important components to any leasing decision are the tax
consequences to the business. Generally speaking, the decision to lease equipment rather than purchase directly will be made by a companies tax advisor. Additional considerations can involve a company’s current financial health and how its existing credit arrangements are structured.
When providing advise on equipment leasing, consultants will most often work closely with a “lease broker” or
“syndicator”. Simply put, professional lease brokers match up prospective lessees with lease investors. They will formulate the basic structure of the lease, lay out the terms to the lessee and “package the deal”.
If the lessee finds the package acceptable the broker will then shop the deal to lease investors. Some brokers will actively finalize the leasing arrangement through the documentation stage and shepherd the transaction. Others will turn the transaction over to the lease investment company and step out altogether.
At this point you may be asking whether you, as a financial consultant can act as the broker and earn the entire fee? The answer is...absolutely. It is usually better, however, to learn the ropes from a professional lease broker before you attempt to go it on your own. One of the lease broker’s qualifications is having an expansive knowledge of the leasing industry. He/she must have an expansive database of lease purchasing companies and know their underwriting guidelines and purchasing
parameters.
COMMISSIONS
For his/her services, a lease broker typically will earn 1-8% of the cost of the leased equipment which is paid for by the lease investment company upon closing. As a sourcing agent to the broker, a consultant will typically earn 35-50% of the lease broker’s commission.
While usually acting only as an agent, lease brokers occasionally invest some of their own funds in the equipment along with the lease investor. By doing so, the broker can add credibility to the overall transaction and earn a handsome return on his/her own investment capital.
PRODUCTS & SERVICES
For his/her services, a
lease broker typically
will earn 1-8% of the
cost of the leased
equipment which is
paid for by the lease
investment company
upon closing. As a
sourcing agent to the
broker, a consultant
will typically earn
35-50% of the lease
broker’s commission.
DISCOUNT MORTGAGE NOTES
Discount mortgage notes are a commonly sought after product area by many consultants and can actually be looked at as a stand-alone business. Most often discount mortgages are referred to owner financed mortgages or seller carry-back
mortgages. They are simply the paper result of a property owner
deciding to finance a piece of real estate personally rather than requiring the buyer to seek funding from a more traditional source such as a bank or commercial real estate lender.
Owner financed mortgage notes often come about when a piece of property is difficult to sell or when the buyer cannot qualify for financing. It may even be because the land is rural and out of the geographic preference area of lenders.
There are literally billions of dollars of owner financed mortgage notes in existence at any given point in time. As interest rates rise and banks tighten credit policies, owner carry-back mortgages begins to play a larger part in creative real estate financing. In periods of declining real estate values or “bursting bubbles”, owners use it as a “sweetener” to help sell their properties faster and at higher prices.
Many home sellers keep these private mortgage notes due to the exceptional income that they provide. Others, however, find they must sell their mortgage notes for a variety of reasons. These include:
Purchasing another new home. Paying for the education of children. Unforeseen medical needs.
Other investment opportunities. Divorce or dissolution of partnerships. Taking exotic trips or vacations.
Consolidation credit cards or other debts.
COMMISSIONS
Consultant fees in the area of mortgage notes are usually charged as a discount to the wholesale price offered for the note by a note buyer. For example, after submitting a $200,000 note for purchase to a buyer, you might receive a “wholesale” quote of 90 cents on the dollar or $180,000. As a broker, you simply sub-tract your fee of say, $10,000 from the wholesale bid and give the seller a “retail” bid of $170,000. If accepted, the buyer provides all of the closing documents.
PRODUCTS & SERVICES
There are literally
billions of dollars of
owner financed
mortgage notes in
existence at any given
BUSINESS NOTES
Seller Financed Business Notes are very similar to Owner
Financed Mortgage Notes except that the note is the result of a
business owner selling his/her business rather than a homeowner selling a home. The creation of a business note is exceptionally common when selling a business due to the fact that many banks will only lend on hard assets such as real estate and buyers of businesses find it difficult to finance the intangible assets of a company.
According to the U.S. Small Business Administration (SBA), there are approximately 23 million small businesses in America at any point in time. Statistically, about 10% of these businesses are sold each year and a majority of these sales include some type of private business note to complete the transaction. Given these figures, there are over 2 million new prospective clients each year holding billions of dollars of new private paper.
As a general rule, the previous owner of the business holding the note does not realize that there is a ready market available for liquidation. While not as expansive as the network of residential note buyers, business note buyers do exist and they are especially attracted to promissory notes which have a commercial real estate component incorporated.
The purchase of business notes is far riskier than most other areas of the paper industry. This is primarily due to the high number of small businesses that fail each year as a result of poor management. While a previous owner of a restaurant, for example, may have been very successful, a new owner might fail miserably due to just small changes in menu items. From the note buyer’s standpoint, these are risks which are hard to quantify and therefore bids on private business notes that do not have a real estate component carry very steep discounts.
COMMISSIONS
Commissions generated on Seller Financed Business
Notes are generally calculated and created the same way as
Owner Financed Mortgage Notes…..that is, upon receiving a
wholesale bid for the note, it is simply discounted further to represent the commission that the consultant wishes to earn. Due to the greater difficulty involved in sourcing a buyer, however, many consultants will charge motivated sellers a consulting fee “upfront” for their efforts. This is usually an hourly rate (ex. $50 per hour) for a guaranteed 10 or 20 hours of time spent in attempting to source the deal.
.
PRODUCTS & SERVICES
The purchase of a
business note is far
riskier than most other
areas of the paper
industry. This is
primarily due to the
high number of small
businesses that fail
each year as a
result of being very
STRUCTURED SETTLEMENTS
Structured Settlements or Structured Settlement
Annuities are certain types of income streams usually paid by an
insurance company to compensate an injured individual as the result of a personal injury lawsuit, medical malpractice suit, wrongful death suit or any other type of personal liability settlement.
As a direct result of injury or wrongful death, the plaintiffs in a litigation are commonly awarded very large settlements by the court or jurors. Rather than receiving the settlement in a lump sum, the injured party is most often paid out over a number of years using some form of annuity structure. The annuitant (the injured party) receives the money in an annual lump sum, monthly payments, or some combination of both. If the annuity is paid as the result of an “on the job” injury ( worker’s compensation ) state laws usually prohibit the purchase of such “worker’s compensation” annuities.
When purchasing structured settlements, one of the main determining factors regarding the amount paid is the insurance company that is involved. Some insurance companies are “rated” higher than others financially and thus make them a much better credit risk in the eyes of a buyer. Additionally, payments from such annuities are never assigned directly to the note buyer. Repayment upon the loan granted against the annuity’s purchased payment stream is simply through a written agreement with the injured party.
The discount rate (amount paid below the face amount) on structured settlements and annuities is slightly higher than that on owner financed mortgage notes for the reasons mentioned above. Since the payment cannot be made directly to the buyer, before funding a purchase, the settlement buyer will most often require that the insurance company agrees to wire monthly annuity payments into a joint checking account set up specifically for that purpose.
COMMISSIONS
Because the purchase of structured settlements must be approved by the court, commission fees paid to sourcing
consultants are calculated as a portion of the discount received by the structured settlement purchaser. Such discounts must be disclosed in court documents. Structured settlements, therefore, do not offer the same lucrative commission opportunities as are found in the private note sector.
PRODUCTS & SERVICES
When purchasing
structured settlements,
one of the main
determining factors
regarding the amount
paid is the insurance
company involved.
OTHER PAPER, PRODUCTS & SERVICES
In addition to those previously mentioned, there are dozens of other areas that provide significant opportunities for investment and commission income in the paper industry. A few of the more important include:
Private Mobile Home Paper. Export-Import Trade Finance. Gaming and Lottery Paper. Consumer Contract Paper Forfaiting Transactions. Tax Certificates.
Letters-of-Credit Sourcing. Recreational Vehicle Notes.
Funeral Insurance Policy Assignments. Traditional Annuities.
Pre-Death Insurance Settlements. Automobile Paper.
Consumer & Commercial Judgments. Royalty Payment Advances.
Inheritance / Trust Advances.
Real Estate Sales Commission Advances. Medical Receivables Purchases.
Delinquent Consumer Debt.
As it is readily apparent, the number of opportunities to generate commission / fee business and for personal investment abound in the paper industry for those individuals that are aware of the possibilities and range of products. More importantly, new opportunities present themselves daily. For consultants, it is important to “stay connected” and to constantly add new arrows to your quiver of products as new commission generating cash flow income streams are discovered.
In addition to the host of commission generating products available to represent, many consultants are focusing on providing fee-based consulting services. Conferencing with small business owners in their start-up phase regarding the types of financing available to that business can be of great value to cash-strapped owners. Such consulting services can assist new entities to grow exponentially in their early years. Fees for such services can easily exceed $50 per hour and for the experienced, over $125.
PRODUCTS & SERVICES
As it is readily
Apparent, the number
of opportunities for
investment abound in
the paper industry for
those individuals that
are aware of the
possibilities and range
of products. More
importantly, new
opportunities present
WHERE ARE THE BEST OPPORTUNITIES?
With such an array of products available to represent, it is easy to understand why many commercial finance consultants lose focus when first beginning to operate. While there are many opportunities in all areas, several offer new consultants an easier path to success simply due to the demand for the service and the ease in which consultants can recognize prospective clients during their marketing efforts. These include:
Factoring….with no formal licensing required, new
consultants can be successfully marketing for prospects almost immediately. Consultants that focus in this unique area of commercial finance find their services greatly in demand and quickly learn how to recognize businesses and industries where factoring provides the most accessible solution to problems of cash flow. Additionally, with its unique “trailing commission” structure, factoring is often the core product for both new and established financial consultants.
Purchase Order Finance….asmanufacturers
continue to move offshore there is a growing need for domestic purchase order finance. And, because purchase order financing arrangements often require factoring as a component, marketing to small manu- facturers requiring this unique form of business finance can be doubly rewarding.
Real Estate Commission Advances...a new and fast
growing area in alternative commercial finance, advancing on earned commissions to real estate agents and brokers has become even more rewarding
as real estate commissions and sales have spiked.
Discount Notes and Mortgages….a tried and true
area of alternative finance that forms the starting point for many new consultants, providing a source of liquidation for privately held mortgage notes has been in demand for over twenty years. Though many states
now require a mortgage brokers license for this area of practice, seeking out owner financed discount mortgage notes can be a core product area for those with an attraction to real estate investment or
brokering.
PRODUCTS & SERVICES
A new and fast
growing area in
alter-native commercial
finance, advancing on
earned commissions to
real estate agents and
brokers has become
even more rewarding
as real estate sales and
commissions have
grown dramatically.
COMPUTERS OFFICE SPACE FAX
TELEPHONE SYSTEMS E-MAIL
HIGH SPEED INTERNET STORAGE
DATABASE MANAGERS CELL PHONES
EXECUTIVE SUITES PARTNERSHIPS
OFFICE FURNITURE business DRESS
HOME VS. commercial space
AUTOMOBILE COMPUTERS
OFFICE SPACE & design FAX
TELEPHONE SYSTEMS E-MAIL
HIGH SPEED INTERNET STORAGE
DATABASE MANAGERS CELL PHONES
EXECUTIVE SUITES PARTNERSHIPS
ne of the more attractive attributes of
the commercial finance consulting
business is the ability to run your
day-to-day operations from the
convenience of a “home-based office”.
Even those that chose to operate from a
more traditional commercial office
environment find that inexpensive
“executive suites” which offer cooperative
support services such as conference rooms
and answering services provide everything
that is required to get the job done right.
etting up your office or workspace is an important first step in beginning your career as a consultant in alternative commercial finance. This industry is often touted in late night infomercials as one where you can successfully work from home and on a part-time basis. The good news is that those representations are probably quite true, but, with a few caveats.
Like many consulting businesses, the actual equipment and support items you will need to “be in business” are modest and will include many items that you probably already own. These will include a computer, fax machine, telephone system, and a reasonable office-style work area including file cabinets and storage. The caveats are these. You will need a work area at home that is free from distractions such as children and loud noises. If you are attempting to operate part-time, some of that time will need to be during normal business hours of 9-5. In our estimation, the following is the type of setup you will need to really succeed.
HOME OFFICE
You will need a room of reasonable size (10x10) that is “office only” and free from distractions such as television sets and children at play. Try to choose a room with natural light and some view. Avoid dark prison-like atmospheres such as basements which are definitely not conducive to productivity. Make certain that the office has a door that can be closed.
Computer
A great deal of your marketing efforts will begin with direct marketing or “database marketing”. You must have a computer, monitor, and printer of recent vintage to manage leads and prospects. If you do not have a system currently, earmark approximately $1,000-$1,200 for a suitable system.
Software
You will need office support software for your
computer if it does not already have it. We would recommend Microsoft Office™ which includes both Word, Publisher and PowerPoint programs. You will use all three in your marketing efforts and they will save you thousands of dollars over time.
The most important software item you will need is a database management system. FactorMax Business Development Systems are specifically designed for consultants in the alternative commercial finance arena
.
Printer
You will be doing a great deal printing in your direct mail marketing efforts. You will find a quality printer to be essential. Good business inkjets are fine and generally under the $300 mark in cost. Laserjets have declined markedly in price and increased in reliability over the years and can be purchased at very afford-able levels. The most important thing to keep in mind is not to “skimp” in this important area..
Telephone Systems
One of the more important components of your office will be your telephone and message handling system. A typical telephone answering system will not due and will only serve to assist you in losing valuable leads and prospects. To succeed you will need a two line phone system with call waiting. You will also need a cellular phone that can accept calls forwarded to it from your base system at home. Additionally, we strongly recommend an answering service that is very professional in nature.
Facsimile Machines
You will require a plain paper fax that has the ability to scan documents and also to make document copies. These 3-1 machines are very inexpensive and can also serve as a temporary back-printer in the event that you standard printer fails.
Desk and Work Areas
Typical home office desks are beautiful and expensive. We recommend modular office systems that are available from most office supplies stores such as Office Max, Office Depot, or Staples, however. Even though this business is one which is primarily based on networking and direct marketing, you will find you need more work space than you think. Make sure that you have enough filing space to maintain broker packages you have requested from funding sources, and the hundreds of support documents, mailers, and brochures you will need during your day-to-day marketing efforts.
Lighting
Try to have a source of natural daylight in your work area from windows. In addition, you will need fluorescent style lights over your work area.
Storage
In addition to filing cabinets, you will need a closet area for storing office supplies such as printer paper, envelopes, letter-head, file folders, etc.
OFFICE SETUP
One of the most
important components
of your office will be
your telephone and
message handling
system. A typical
answering system will
not due and will only
serve to assist you in
losing valuable leads
COMMERCIAL OFFICE SPACE
As a consultant, you may elect to lease traditional commercial space to house your business. This is most often in the form of an “executive suite”.
Executive suites are cooperative quarters where occupants have a small, stand alone office but share some common areas and services such as a conference room, reception area, and answering service. They are a favorite for stockbrokers and insurance agents that have independent practices.
In addition to executive suites, many alternative commercial finance consultants will seek lodging in community banks. When banks build their buildings, they will often over-build to allow for expansion in the future. Until the future comes, they have space available to lease.
The benefits of leasing a small amount of office space from a bank are obvious. As banks turn down loan applicants, many of those business owners can be directed to your office for help in securing some form of alternative financing.
In addition to referrals, becoming affiliated with a bank lends a great deal of credibility to your business model. Don’t expect the bank to wholeheartedly embrace your business immediately, however. You will need to establish relationships within the bank and develop some trust. After time, however, leasing space from a bank can be one of the best marketing moves you can make as a new consultant.
OFFICE EQUIPMENT
Your office equipment required for setting up shop in commercial space is identical to that needed for your home office except that looks become even more critical. Most executive style suites have large windows or floor-to-ceiling glass areas so they are not confining. The view out is great but this feature also allows everyone to see in.
Spend some time on office layout and furniture design. Make sure that those that look in don’t see a myriad of wires and unsightly storage. A great deal of office furniture sold in discount stores is junk. You will be surprised to see how quickly legs fall off and drawers quit opening. It is best to spend a few more dollars initially to purchase furniture of commercial quality that will stand up to heavy use. You may also consider used furniture from liquidators if it is of very good quality.
OFFICE SETUP
Spend some time on
office layout and
furniture design.
Make sure that those
that look in don’t see a
myriad of wires and
unsightly storage.
OTHER AREAS OF IMPORTANCE
In addition to the physical and equipment aspects of setting up your office, you will need additional items before you can actually say “I’m in business.”
Your Business Name
The name you select for your business is of paramount importance. When marketing, it should convey to leads and prospects the nature of your business. Too many of those first entering the industry are not aware of the importance of your name.
Letterhead, Envelopes and Business Cards
You will need the basics here including two or three sizes of envelopes, professionally designed and printed business cards and a quality letterhead.
Brochures, Flyers, and Sales Literature
As you determine your areas of focus, (factoring,
discount notes & mortgages, export-import trade finance, etc), you will need to create sales support documents such as brochures, mailing stuffers, and other marketing pieces. This is no area to skimp. Well designed brochures and flyers will convey quality and professionalism to your prospects. If necessary, hire a specialist to assist in creating your important marketing pieces and sales literature.
Website
Websites have become so important to the overall marketing efforts of any sales operation that its hard to believe that we ever did it without them. For those operating as consultants in commercial finance, a professionally designed website is a key component to virtually all direct marketing campaigns.
For consultants, websites act as a virtual billboard. They are a place where prospective clients can go at their leisure to get more information about your services. Most importantly, your website is where prospects will go to request additional information about your capabilities and respond to “offers” that are made in your mailings or telephone calls.
Your website should contain at least one page of informa-tion on each service or product you offer. Addiinforma-tionally, it should contain a form where leads and prospects can order additional information or request that you contact them.
OFFICE SETUP
Websites have become
so important to the
overall marketing
efforts of any sales
operation that its hard
to believe we ever did
without them.
List building cold calling
Direct mail telephone marketing
Networking canvassing
Database management system
Public speaking free publicity
Relationship building
List building cold calling
Direct mail telephone marketing
Networking canvassing
Database management system
Public speaking free publicity
Relationship building
Product shopping trade shows
hile you will need to acquire a great
deal of product knowledge to succeed
in the industry, your marketing skills
will ultimately determine your degree
of success as a financial consultant. If you
do not already possess them, you will need
to quickly develop marketing skills in
many areas including direct marketing,
networking, and relationship building.
Most importantly, you will quickly find that
the telephone is the “key” tool in your
marketing arsenal.
arketing for leads and prospecting those leads for clients are the most important aspects of actually developing your consulting business. In fact, your success or failure will most likely be determined by how well you generate leads and prospect rather than your actual product knowledge. Without question, a well rounded knowledge of the industry is essential. It is your marketing skills that will “bring home the bacon”, however.
For most consultants operating in alternative commercial finance, marketing efforts will be focused heavily in the areas of direct marketing, networking, and relationship building. All three are highly important and the sooner you develop your skills in these areas, the faster you will begin producing commission dollars.
DIRECT MARKETING
Direct marketing is a systemic approach to business generation which is designed to elicit a response from a suspect or prospect in order to develop a client relationship. As opposed to advertising, which simply builds brand aware-ness, direct marketing focuses on developing business now!
As a consultant in commercial finance, you will utilize a host of direct marketing tools including direct mail, canvassing, telephone marketing, web-based internet marketing, and broadcast marketing.
NETWORKING
Networking is simply a matter of meeting people that can refer business your way. Research shows that many successful home-based businesses, succeed primarily on networking in their early stages. Many opportunities for business development will result from being in the right place at the right time. Those that employ networking as a primary marketing tool will join many formal or informal networking organizations such as Chambers of Commerce, fraternal clubs (Rotary, Kiwanis, etc.) or social organizations in which they have a special interest.
Networking is often called “word-of-mouth” marketing because it is just that. Informal networking is done just about everywhere including sporting events, after hours social gatherings, religious functions, and so forth. It is simply a matter of identifying and frequenting those places and events where prospective clients or referral sources patronize.
RELATIONSHIP BUILDING
Relationship building refers to the time you spend building meaningful relationships with prospective clients. Unlike networking which refers to word-of-mouth marketing to those that can refer business to you, relationship building is used to develop business relationships with those individuals that you are actively pursuing as a client.
Relationship building focuses on establishing a business trust that will lead to a client relationship at some time in the future. It basically says “OK, you know what my services are and when you need me, I’ll be here”. It is an important marketing methodology used by those in business for the “long haul”. It will provide a steady stream of business each year if properly developed.
LIST BUILDING
As a financial consultant, you must develop good lists for lead generation and prospecting. The effectiveness of your list building skills will very much determine how rapidly you succeed in the industry. Building poor lists of unqualified prospects is a tremendous time waster and will lead to frustration down the line. Conversely, spending the time necessary to build quality lists of qualified prospects will insure the rapid growth of your business and, of course, your income. As you begin to grow your financial consulting business, you will quickly learn the value of being able to recognize those businesses and/or individuals that can qualify for and that need your services and expertise.
DATABASE MANAGEMENT
As you begin to hone your marketing skills, it will also quickly become evident that a good database management system is absolutely essential. Categorizing members of prospecting lists and recording pertinent information about them for networking and relationship building is extremely important. Because of the physical numbers of leads and prospects that you will be dealing with, sound database management becomes a necessity.
By definition, all direct marketing is database marketing. For those first beginning their career as a commercial finance broker, this includes the all important medium of direct mail marketing. Managing productive direct mail campaigns can only be accomplished with a computer and a state-of-the-art database management system.
As a commercial
financial consultant,
you must develop good
lists for lead
genera-tion and prospecting.
The effectiveness of
your list building skills
will very much
determine how rapidly
you succeed in the
industry.
MARKETING
PROSPECTING
Prospecting is often defined as “seeking that which is of value”. For financial consultants and brokers operating in the business development area of commercial finance, prospecting is often better defined as “discarding that which is off little or no value”.
The skills you develop at list building will provide your business with the raw material for success. Prospecting that raw material the proper way is what will generate your income of commission dollars. Modern practitioners of “guerrilla market-ing” know the value of developing keen prospecting skills and discover methods of getting business to come to them.
USING THE INTERNET
The wealth of information available on the internet has dramatically changed how we market and taken a great deal of the “grunt work” out of it. The time necessary to build good prospecting lists, for example, has been reduced by 90% due to the vast amount of quality information available on the Web. Successful consultants learn quickly the value of “surfing” for prospects and leads and will spend a good deal of after hours time using the information easily accessed on the internet for building quality prospect lists.
In addition to being an incredible source of raw names for your compiled lists of leads and prospects, the internet will also provide you will valuable information regarding networking opportunities such as trades shows and expositions, clubs and fraternal organizations to join, business support groups, trade magazines and publications for advertising, etc.
YOUR COMPANY WEB SITE
As mentioned in the previous chapter, you simply cannot market in today’s world effectively without a company web site, period. A professionally designed web site provides as much marketing support as room full of assistants.
In the field of commercial finance consulting, your company web site will act as a “virtual billboard” of information that prospective clients can access at any time of the day. It will support all of your marketing efforts by giving those you meet quick access to more information about your products and services. Your web site must have a form area where prospects can request additional information or subscribe to your offers.
MARKETING
In today’s business
arena, you simply
cannot market
effectively without a
company web site,
period. A
profession-ally designed web site
provides as much
marketing support as a
HOLDING WORKSHOPS & SEMINARS
Holding promotional workshops and seminars is one of the surest methods of opening new accounts and generating new business. It is also one of the more difficult marketing methods for those that have no experience speaking in front of small crowds. This forum is well worth mastering, however. Those that use it find it almost impossible not to open one or two new accounts from each lecture.
Workshops and seminars can be given early in the morning as breakfast meetings, at noon as luncheon seminars, or after hours as an informal workshop. They are generally held in a restaurant’s private meeting room for breakfast or luncheon seminars or at hotel / motel locations for after hours lectures.
Employing seminars and workshops as a primary method of marketing literally kills two birds with one stone. This is because the method that is most widely used to invite prospective clients to a seminar is direct mail followed up with a phone call. It is actually during the follow-up phone call that you will qualify the prospect. The seminar then becomes a time to sell and close the deal.
OTHER MARKETING REQUIREMENTS
No matter which type of marketing method you choose, the effectiveness of that method will be proportional to the amount of personal contact or “human factor” you add with the prospect. It is often quoted that direct mail is 10 times more effective when followed up with a telephone call. In the business finance world, the multiple is more than 50 times more effective. For those that suffer from shyness or that are withdrawn in crowds, be advised that success in commercial finance consulting will require that you exhibit an outgoing personality and a confidence in groups and gatherings.
Above and beyond all, the importance of the telephone and your ability to use it effectively to prospect for and qualify leads cannot be overemphasized. It is the most powerful tool in your arsenal and must be used daily for prospecting and network-ing. Organizing your calls and tracking their effectiveness is the job of your database management system. You must first, how-ever, provide the database management system with data. There is no faster and less expensive method for doing just that than the telephone.
