World Executives Digest | Managing cash flow to ensure a smooth financial journey is challenging for any business and it may almost seem insurmountable in the context of real estate business. The real estate business is extremely dynamic and the volatile market that never seems to settle, pose tough challenges for real estate brokers in arranging for business finance. The volatility of the market is beyond anybody’s control, and brokers learn to live with fluctuating demand and sales that have become the hallmarks of the real estate business. It is almost impossible for brokers to work out the cash requirement for business, as too many variables that one has to encounter can upset all calculations. The uncertainties surrounding the business puts a strain on the cash flow and brokers have to ensure that they have access to funds at the right time to keep the business buoyant.
The task is far from easy because, in addition to the market uncertainties, brokers cannot avail the traditional methods of business funding. The traditional sources of business funding like banks and other financial institutions do not extend any support to real estate brokers. Brokers have to depend on their own earning as the only source of funds for business. But the earning is neither regular nor quickly accessible. Even if a broker earns a commission today by signing a deal, the money comes to him or her only after the deal closes, which takes quite some time. How do brokers then manage to keep the show running?
Faster cash out
In the absence of traditional business financing for real estate brokers, some financial companies have worked out a scheme to provide finance to brokers by addressing the issues that concern brokers. From the pattern of payment of commissions, it becomes clear that the delay in monetizing commission is the cause of the problem. If the money earned from commission comes to the brokers quickly, it could provide considerable relief in overcoming the financial constraints. Realtor commission express, advance commission, or commission advance as the scheme is named, allow brokers to cash out the commission almost as soon as they earn it.
Since the document of a property deal struck by a broker confirms the earning of the commission, which the broker would receive after some time, he or she presents the document to the company that offers to buy the commission in exchange for some fees. Brokers can receive the cash immediately for the major part of the commission, almost 75%, leaving only a small portion for collection after deal closure. The value of getting quick money is too high, and brokers do not mind bearing some small cost for it towards payment of fees to the financing company. Any real estate agent with a valid license, good track record and meeting all legal obligations can qualify for advance commission.
Recycling funds back into the business
Receiving commissions promptly help real estate brokers to organize the business finances in a better way without depending on loans. Staying away from debts come as a blessing in disguise because even if it might be easy to obtain loans, managing debts is not always easy. Many companies have succumbed to debts just because it had become overwhelming. As quickly earned commission is your own money, it gives the confidence and pride of running the show on your own without any external aid.
To prepare for the bad times, brokers have to pay attention to every business leads to ensure that it leads to conversion. Higher is the conversion rate; less are the gaps in earning and it would help to smoothen the cash flow with a timely infusion of funds.
Staying active and relevant
When brokers face problems in cash flow, it not only becomes difficult to keep the business afloat but it also affects the relationship with clients, as they are unable to keep in close touch. Ready cash from commissions helps brokers to remain active and agile as the business gains momentum and the prospects for better business motivate them. They can take new initiatives for marketing aggressively and making the business grow without any fear of stagnation. When there is a steady flow of money, brokers can concentrate on developing the business with a single-minded devotion that brings a complete change in their attitude towards business.
It will be a mistake to look upon commission advance as an end in itself. Rather, the arrangement provides the much-needed opportunity of recouping finances to take a fresh look at the business on a positive note. How much brokers can take advantage of the arrangement depends on their business commitment and ability to manage finances besides the skills necessary to make the business grow.
The advance commission has brought a lot of relief to real estate brokers who have now become more confident in their abilities to sustain the business.