A factoring broker is a person (or firm) that works to take businesses accounts receivable packages to financial firms who will place bids on them. Depending on how the broker is setup, he may take them to an open market or may present them directly to a specified group of companies that he does business with. The broker himself does not purchase your receivables, but merely acts as an agent to find someone who will.


The best type of broker to look for when choosing a factoring service is one that will take your receivables or contracts to the open market and let them be bid on by all eligible companies. By doing this you are going to receive the maximum value for your accounts receivable portfolio as firms will bid against each other and drive the price they are willing to pay for them up.


On the other hand, factoring broker may work for only a set group of firms and will present your package only to them for bidding. While this has the effect of keeping the price low, depending on what your accounts receivable package might look like (high risk, etc) this may be the only option available to you. The more specialized your receivables package is usually the more limited you will be in your choice of brokers and firms that will bid. Most brokers that work for a limited amount of companies deal only in specialized areas of factoring.


When looking for a broker you should find out -

What their record is in selling other receivables package?.
What is the average discount rate?
How many people will they be presenting your receivables package too?
How well do they know your particular field?