EDITIONS

Advance commission – the easy way of financing real estate businesses with quick cash

16th Apr 2018
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Money remains elusive to real estate brokers because whatever commissions they earn do not reach their banks immediately. Although earning often equates with the availability of cash, mostly in case of trading business, it is not true for real estate agents. Like most other businesses that sell products usually offer credit terms to customers and receives the proceeds from sales after some time, brokers to have to wait to receive the cash from commission earning. 

Commissions are the only source of earning for brokers, and it acquires a lot of importance because the money goes into financing the business. Self- financing is the only method of funding available to brokers because no establishment that offers business finance and loans would entertain brokers. Although it might sound something like discrimination, there is the reason for it.

Brokers of real estate are professionals in their rights and carry out a legitimate business by acquiring a license for it. Then why do brokers not able to avail the standard business financing methods that all other businesses enjoy? The real estate business is different from all other businesses because it is not a business for the faint-hearted. 

The industry goes through unexpected volatility that keeps coming back. While other industries might experience volatile markets, the phenomenon is mostly temporary. But for the real estate industry, the volatility seems ingrained in the business so much that it has become a permanent characteristic. This is where real estate brokers are a different sort of professionals than others, as they have to live with uncertainty. The uncertainties translate into high risk for investors who prefer not to provide finance to brokers.

The financial constraints of brokers

Facing such apathy from traditional financing sources, brokers have no alternative but to use their resources for arranging finances for their business. Some might use their credit cards or even borrow from friends and relatives as a stop-gap arrangement, but these can never substitute the need for structured financing. Credit card interests are too high, and the circle of friends and relatives has its limits. 

Moreover, you cannot keep going back to people asking for money now and then just to keep your business running. When the odds were up, brokers started depending on their commission earning to put back the money into the business, but there was a problem too. Brokers cannot ensure continuity of earning because of the gaps between successive commissions and the time it takes for the commission payment to cash out. This strained the cash flow.

Where do they go?

Does it mean that brokers are sitting ducks who have to be at the mercy of the market? Indeed not, because now that the commission advance for realtors is easily available, the situation has changed. Despite depending on commission earning, brokers do not have to wait for completion of deals to enjoy the cash. The companies that offer the arrangement of commission advance to brokers are willing to pay them upfront based on the documents executed for the deal. 

It paves the way for brokers to present the documents to the advance commission company and walk away with a major part of the commission, thereby putting an end to the waiting period that had been the thorn in the flesh. Sooner the brokers get the cash better it is for them as they can use to improve the cash flow of business that is essential to ensure its smooth running.

Choosing a commission advance company

Brokers now have several options to explore for availing commission advance because many companies have now come forward to help brokers with financing. Browsing the internet is an easy way to identify the companies by referring to the websites and reviews that tell about what kind of financing options are available. Different companies offer different options as the percentage of payout can vary as also the terms of payment and fees. The arrangement is similar to any other short-term loan, although it is not a loan but advance, because usually, three months is the maximum time for settlement of the advance. In exchange for the service, the company charges a small fee, which is negligible considering the convenience that brokers enjoy by availing ready cash.

Eligibility criteria

All brokers can avail commission advance provided they run a legitimate business and possess a license. However, the companies would like to evaluate the performance of brokers by looking at the number of deals they execute in a year that determines the quantum of cash they could get. Brokers who have higher selling abilities stand to get more advanced than those who have smaller transaction volumes. Some companies can even extend the term for payment/settlement in exchange for some fees.

The advance commission is like anytime money for brokers who do not have to worry about business financing anymore.

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