Authored by Phil Cohen
There is a time when almost every business experiences a disruption in cash flow. This can come from slow-paying customers, seasonal changes or other challenges. When this happens, it is a temporary roadblock that does not require ongoing support. You do, however, need cash at this moment. For a flexible option, spot factoring can be the solution.
How Does Spot Factoring Work?
Spot factoring, also known as single-invoice factoring, is when a business sells only one invoice for factoring compared to traditional factoring that is on a more regular basis. Spot factoring is a single transaction that does not carry the expectation that you will continue factoring regularly. Just like traditional factoring, you receive funds after selling the invoice to a factoring company following the completion of work for the client. Most factors will advance 70-90% of the invoice’s value. The rest of the money is put into a reserve account to be released following the customer’s payment of the invoice, minus a small factoring fee.
Finding the Right Factoring Company
There are some steps to take when starting the spot factoring process. It is best to find a factoring company before you need the cash. It will take stress off you and the factor if you have everything in place prior to selling your invoice. When you select your factor early, you eliminate the chance that your receivables will not be purchased or experiencing invoice aging, which is a risk that can turn away an otherwise good partnership fit. It is important to find a factor that understands your industry and needs. A factor broker, such as Factor Finders, can pair you with a factoring company that is experienced in your industry. Now is the time to begin neat bookkeeping for future factoring. The factoring company will require records of payment trends if you have already worked with the company whose invoice you want to factor. If you have invoices that have been promised as collateral, factoring companies are less likely to purchase them. Spot factoring does not take into consideration the age of your business or your credit history. Even if you own a startup or you have poor credit, you should be honest with the factor so they can assist you with overcoming the hurdles.
Reach Out to Factor Finders
Factor Finders can help you find the right factor for your needs. Contact us today to get started. We will answer within minutes to begin matching you with a factoring company.