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Real Estate Commission Factoring: Best Way to Overcome the Difficulties of Finances

11 min read

Real estate brokers who run their own business have to face financial apartheid due to the discriminating attitude of the traditional financial institutions. No financial institution whether it is banks, credit unions or private financiers is willing to provide business finance for real estate brokers. While it may sound quite harsh, the ground reality is that brokers in the real estate business have to struggle for finances. Although like any other business, brokers to need occasional financing support, unfortunately, they are unable to get it due to the apathy of the financing institutions.  In the eyes of the financial institutions that offer business finance, brokers are too risky to depend upon. Financiers always look out for safe investment options and brokers are not the breed they could rely upon. The absence of structured financial support causes a lot of inconvenience to brokers in running their business.

Like any other business, managing cash flow is a challenge for brokers too as they have to wait to earn the commission. Despite finalizing a deal that confirms the commission earning, brokers receive the cash only when the deal concludes successfully. As the business of real estate involves extensive legal and commercial processes, it takes time for a deal to complete and brokers despite knowing that the commission is in place are unable to access the cash. The irony is that despite having money, brokers are unable to use it whereas they desperately need cash, as they have to put it back into business because it is the only source of funds for them.  Add to this the problem of uncertain income that brokers have to live with.

The difficulties that brokers face

The volatility of the real estate market is one of the reasons why it is difficult for brokers to avail structured business finance.   The extreme market fluctuation arising from the volatile nature of the market puts excessive strain on demand and supply of properties that affect the earning of brokers.  It is a roller coaster ride for brokers as far as their earnings are concerned and this puts them at a disadvantage when seeking traditional business finances.  If you observe the real estate broking business, you will discover that the ongoing need of finance for sustaining the business is much more than the finance required during startup. Since brokers have to engage in marketing the property, it requires a regular flow of cash to run the show. Inability to market properly could affect the business adversely, and brokers have to organize their finances to fund the business.

Surviving in a volatile market

Brokers do not have any control over their income and can do little to counter the market forces at play that creates uncertainties. The only way to survive in the volatile market is to ensure that there is some steadiness in the flow of income so that they do not have to starve for cash at any point in time. To maintain a continuous flow of income,brokers have to work hard to ensure that despite the odds they can create a steady pipeline of leads that keep converting into sales.  Since the commission earning has a delayed cycle of payment that happens only when deals close satisfactorily, to overcome the delay or shorten the time span, earning a commission in close succession is the only way out. It means that maintaining continuity of sales is the answer to the problem, but the challenges might seem too much.

Overcoming the problem

Since there is little that brokers can do to contain the external factors, an easier way would be to explore how best they can use their internal resources for quickening the payment of commission.  The only way that brokers can cash out the commission almost as soon as they enter into a deal is to avail the facility of real estate cash advance that some financing companies offer.  Advance commission companies have created the scheme exclusively customized for meeting the financial needs of real estate brokers.  The method consists of the financing companies recognizing the commission as assured payment and based on it offering brokers a major part of the commission in cash against payment of some fees. As a result, brokers receive the cash on presenting the documents of the property deal without having to wait for months to earn it.

Changing fortunes

The advent of the advance commission has empowered brokers who can now aggressively take up marketing and strike more deals to maintain a healthy pipeline of earning prospects duly supported by prompt availability of cash. The steady and timely flow of cash help brokers to bridge the gaps in cash flow effectively that smoothens the business process and encourage brokers to pursue growth.

The arrangement provides elbowroom to brokers who can now organize the finances in a better way.

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