For many real estate agents and brokers, the thought of getting a business loan is a hard concept to consider.
Given the rollercoaster nature of the real estate industry and the uncertainty of income that real estate agents have to face are reasons why banks and other financial institutions may be reluctant to offer any credit lines or loans to them.
However, instead of considering this a disadvantage in your business, you might want to look more closely and find that it is actually a blessing in disguise.
Debts can become quite menacing for the business of real estate agents whose income is solely dependent on commissions from sale only. How then would real estate agents ensure a steady flow of cash that keeps the business going? With some financial companies have come forward with the offer for buying a commission from real estate agents at a discount, the liquidity of the business gets a boost.
Instead of borrowing money to reinforce the business finances, real estate agents can use a smart way of rolling back their own money into a business with the help of commission advances.
Since the commission is payable to agents only on deal closure, there is a considerable gap between the time of signing the sale contract and receiving the commission. Instead of waiting to earn the commission, agents can now approach the financial company to sell the pending commission that they would earn from a contract to the financial company for a discount. The sale can happen immediately upon signing the sale contract document, and the agent receives the commission immediately without having to wait for closing the deal.
Whether to sell the entire commission or a part only, is a decision that the real estate agent has to take. Since there is a capping to the amount of commission that the financial company is willing to pay in advance and business needs can vary, it is essentially a business call that real estate agents have to take.
Legion Funding, a subsidiary of Legion Capital Corp., offers a Commission Advance Program, a business finance program that allows real estate professionals, including agents, title agents and appraisers, to immediately access a major portion of fees and commissions due from a pending real estate transaction.
The company also offers an enterprise or partnership level version of the program, the Commission Advance Partnership Program to select brokerage firms. The Partnership Program allows Real Estate Brokers to launch a customized and fully branded Commission Advance Program, using the financial backing, technology platform, back office, customer service and marketing support of Legion to create its own customized and branded program. Under the Partnership Program, there is no capital commitment on the part of the brokerage firm, with Legion Funding providing 100 percent of the capital for the program.
“The Legion Commission Advance and Partnership Program is something we are incredibly excited about and we are proud to offer this valuable service to the real estate community,” explained J. Bradley Hilton, President of Legion Funding. “This program allows REALTORS® to access the capital and marketing they need to grow their business and increase listings and sales, and also allows brokers to create a brand new untapped revenue stream using our capital, technology and support. It is truly an exceptional opportunity for real estate professionals.”
The standard norm for paying back the advance amount to most financial companies is 30 days with a grace period of 15 days from the deal closure.
In case the deal falls through, and the sale is canceled, the agent has to pay back the money from some other source or offer a replacement contract to replace the earlier one that had to be scrapped.
As long as you have a valid sale contract from which you earn commission, you can offer multiple contracts to the financial company for availing the commissions in advance. However, the total amount of advance commission has to be within the maximum amount that the company has fixed for the advance limit. This can vary from one company to another as also the special discount offered to first-time customers.
The arrangement of the advance commission has brought a great reprieve for real estate agents who have found a sound method of financing to meet the cash flow challenges of business. They can now keep investing in a business with their own money.