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What Is Spot Factoring?

Phil Cohen

Spot factoring is a single transaction version of standard invoice factoring. Rather than signing a factoring agreement for ongoing services, you submit a single invoice to the factoring company for verification and funding.

How Does Spot Factoring Work?

The approval, advance processes and rate with spot factoring are the same for those used in typical invoice factoring.

The Spot Factoring Process

  1. Your company contacts us either by giving us a call or by requesting a free quote via an online form and tells us about your business.
  2. Based on the information you gave us, we pair you with a factoring company that best fits your business’ wants and needs.
  3. The factoring company then puts your business through a quick approval process.
  4. Once approved, your business can then submit invoices to the factoring company for work completed.
  5. The factoring company then contacts your business’ customers and verifies that the service was completed or the order was filled.
  6. Once verified, the factoring company advances your business up to 95 percent of the accounts receivables, keeping the rest as the reserve.
  7. Your business’ customer pays the factoring company on their normal payment terms.
  8. Once the factoring company is paid, they release the reserve to your business minus a small factoring fee.

What is the Difference Between Spot Factoring and Other Factoring Options?

Normally, when businesses want to factor, they want to factor a series of invoices that are ongoing. When companies are looking to factor ongoing invoices, they turn to traditional recourse or non-recourse factoring options. Factoring companies usually do not set a minimum invoice amount when working with recurring invoices.

Companies choose to use spot factoring when they only have a certain amount of potentially non-recurring invoices that they wish to factor. Factoring companies will likely establish a minimum invoice amount to factor so the transaction is beneficial to all parties involved.

How Do I Find a Spot Factoring Company?

Spot factoring companies can be found easily by doing a simple search online. However, each factoring company offers different rates for spot factoring services. If your company wants to get the best bang for their buck, you’ll have to fill out several different forms and compare prices.

Use that time and effort more efficiently — let us find you a spot factoring company that will be the best for your business. Just tell us what your business does and what you’re looking for and we’ll match you a spot factoring company that will best satisfy your needs.

How Do I Get Approved For Spot Factoring?

Getting approved for spot factoring is as easy as having factorable invoices. Your invoice should be for work completed. Make sure you send a copy of it to your customer as usual. In addition, the invoice or invoices you with to spot factor for should not be pledged to any other entity as collateral for debt.

If you have a history of working with the customer whose invoices you wish to spot factor, you should also present the spot factoring company with prior payment records that establish a solid payment history. This can help you secure funding faster and potentially benefit from a higher advance or lower factoring rate.

What you don’t need to qualify for spot factoring is a spotless credit history. Spot factoring companies regularly work with new startups or other companies that have faced financial difficulty in the past and are able to work past many common credit issues that arise during the due diligence process. As long as you are forthcoming about any financial issues your spot factor will be able to address them more quickly – and you will establish a strong foundation for your future factoring relationship.

what is spot factoring

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