We're All Fighting Over the Same Slice, While the Rest of the Pie Goes Cold
I've been in partnerships and business development for a long time, and there's one thing I've noticed about the commercial finance industry: we are shockingly good at protecting our turf and equally bad at helping the client when they don't squarely fit our box.
I get it. We all have credit boxes, risk parameters, investors, capital partners, and compliance teams who want us to stay in our lane, thank you very much. That's not a character flaw, that's just how the business works.
But here's what I keep thinking about: every time a factor declines a perfectly good business because it doesn't invoice, and every time a revenue-based lender passes on a company because it's too seasonal, that business owner walks out the door and into the arms of whoever will take them. Sometimes that's a great lender. But most of the time, it isn't.
And the kicker? We could have sent them to the right lender, but we chose not to.
Small Business Owners Don't Know What "Factoring" Means (and That's Not an Insult)
Here's a truth we don't say out loud enough: the business owners we're trying to serve are not spending their spare time sitting around studying the difference between factoring, asset-based lending, bridge financing, short-term business loans, and lines of credit. They're running the business. They're managing employees, chasing invoices, dealing with broken equipment, and trying to figure out how to make payroll when three clients paid late and several new projects are on the horizon
When they come to us, the ask is simple: I need capital. Can you help?
Our industry's answer, way too often, is a polite version of: "Not really, no. Good luck though."
The commercial finance world has carved itself into neat segments; factoring for invoice-based B2B companies, revenue-based financing for merchants and service businesses, ABL for asset-heavy borrowers, and so on. These distinctions make sense from a product and risk standpoint. But from the client's perspective, it feels a lot like walking into a mall where half the stores don't carry your size and nobody will point you to the one that does. "Happy to help" has seemingly become "Good luck out there."
The part that should bother all of us: when we leave that gap unfilled, someone else fills it. And that someone is often a high-cost broker whose primary qualification is that they'll say yes. And not because the deal is right for the client’s long-term profitability, but because the commission is right for the broker’s next check.
That's a solvable problem. And it doesn't require reinventing your business model.
Factors and Revenue-Based Lenders Are Not Actually Competing (Seriously, We're Not)
I want to make a case that I genuinely believe, and one that's been validated through years of working with partners across the commercial finance space: factors, asset backed lenders, commercial lenders and bridge or revenue-based lenders are serving different businesses. The overlap is much smaller than people assume.
The businesses that thrive with factoring have a specific profile: steady invoice volume, creditworthy account debtors, established B2B relationships, and the operational maturity to manage a factoring arrangement. That's a real, meaningful segment of the small business market. It's also not everyone.
Think about the businesses that don't fit that profile: a landscaping company that gets paid project-by-project. A boutique fitness studio that runs on memberships. A young staffing firm that hasn't built enough invoice history yet. A contractor who does great work but gets paid in lump sums at job completion. A brewery that’s opening an on-site eatery. None of these are bad businesses. They're just not factoring businesses, right now.
That staffing firm? Give it 18 months of growth and it might be exactly who you want to factor. That contractor might be building toward a commercial book of business with consistent AR. The clients you can't serve today are the pipeline you're ignoring tomorrow.
So, when a factor refers that landscaping company to a revenue-based lender they trust; one with fair terms, a real track record, and a reputation for treating clients well, everybody wins. The client gets funded responsibly. The factor earns goodwill and often a referral fee. And when that client grows into a factoring profile, they're coming back to the person who helped them.
The alternative is leaving them to find their own way, which, in this market, too often means a 1.45 factor rate and a daily ACH they didn't fully understand when they signed.
Know the Exit Ramp, and Make Sure Your Clients Do Too
Let's talk about something the industry doesn't discuss enough: what happens to the small businesses already stuck in high-cost MCA stacks.
These are real companies, often good companies, that needed capital, couldn't find the right door, and ended up with a product that was sold to them by someone more interested in points than in outcomes. Now they're cash-strapped, renewal-dependent, and convinced that this is just what financing costs. Nobody told them there was another way.
This is where I think factors and responsible lenders have a genuine opportunity, and frankly, a responsibility.
If you're talking to a business that's carrying high-cost MCA debt, the conversation doesn't have to end at "we can't help." A factor who understands the landscape can ask a few key questions: Does this business have receivables that could be factored to retire the MCA position? Has the business matured enough in its revenue profile to qualify for better terms now? Is there a restructuring or consolidation path that gets them out from under the stack and into something sustainable?
Most of the time, business owners in this situation don't know these paths exist. They've never been told. Because the people who put them in those deals had no incentive to show them the exit.
That's the difference between a commission-driven transaction and an actual client relationship. One puts a business in a product. The other puts a business on a trajectory.
The brokers and lenders who only know their own product, and only get paid when that product closes, cannot have this conversation. They're not built for it. But the factors and lenders who understand the full landscape, and who have trusted referral relationships across it, can become something much more valuable than a funding source. They become the person a business owner calls when things get complicated.
That's a position worth building toward.
The Difference Between a Referral and a Hand-Off
Now, I'm not going to pretend all referral partnerships are created equal. I've seen plenty that were basically just lead dumping, "here's a number, good luck", where the client had no idea why they were being sent somewhere else or whether the new lender was actually going to help them. That's not a partnership. That's a polite way of getting someone out of your office. And honestly, it's not much better than what the high-cost MCA market is already doing to these clients.
A real referral looks different. It means you understand your partner's product well enough to know this client genuinely fits, not just that they don't fit you. It means the introduction is warm, not a business card on the way out the door. And it means communication flows bidirectionally: if that client gets funded, grows, and starts looking like a factoring candidate in a year, the factor should know about it soon enough to do something about it
At Fora Financial, we've deployed more than $5 billion to over 55,000 businesses, and a meaningful portion of that volume has come through commercial finance partners: factors, debt advisors, and asset-based lenders, who understood that a client they couldn't serve at that time still deserved a good outcome. What we've seen consistently is that the partners who refer thoughtfully are the ones who get the best deals flowing back to them.
It's not complicated. It's relationship-driven. Which, if you've been in this industry for more than five minutes, should feel pretty familiar.
Your Clients Are Talking About You Either Way
Here's something worth sitting with: small business owners talk. A lot. They talk to their accountants, their attorneys, their peer groups, their industry associations. They leave Google reviews. They post in Facebook groups. They mention lenders by name when someone in their network asks who to call.
The MCA industry has spent years earning a reputation problem, largely because too many people in it prioritized commission over client outcome. That reputation doesn't stay contained to MCA, it bleeds into how small business owners view alternative finance broadly. Every one of us in this market is dealing with some version of that trust deficit.
The factors and lenders who operate with transparency and genuine client advocacy have a real opportunity to change that narrative, not just by being good at underwriting, but by being good partners to the business owners they interact with, even the ones they decline.
"We can't do this deal but let me connect you with someone who can" is a sentence that costs almost nothing to say. But to the business owner who's been turned down twice and is starting to panic, or worse, who's already been burned by a predatory product, that sentence is the difference between a nightmare experience and a story they tell positively for years.
That's how you become a trusted advisor instead of just a credit decision. And trusted advisors get called first when the next deal is ready.
The Pie Is Big Enough — Let's Stop Letting It Go Cold
I'll wrap with this: I'm not asking anyone to overhaul their business or take on deals outside their risk appetite. The whole point is the opposite; your standards stay exactly where they are. You're just deciding what to do with the business that doesn't clear them.
There are two versions of how this industry handles the clients who don't fit. In version one, we decline them cleanly, they find their way to a high-cost product, and we never see them again. In version two, we decline them thoughtfully, connect them with a partner who can actually help, and we become part of their financial story in a way that pays dividends for years.
The alternative finance market is massive, fragmented, and full of businesses that need capital and can't always find the right fit on the first try. No single product is right for every client at every stage. The factors, lenders, and debt advisors, who figure out how to work together, really work together, not just exchange business cards at conferences, are the ones who will own the most meaningful client relationships in this market.
There's a lot of pie here. It doesn't have to go cold.
I'd love to talk shop with anyone at IFA who's thinking about this, whether you're already building partner relationships outside factoring or just starting to wonder if you should be. Come find me. I'm the one who'll probably be talking too much at the cocktail reception.
