Invoice factoring has been around for years, helping companies boost their cash flow. An outside company agrees to buy your invoices at a discounted rate, and then the company is responsible for collecting the unpaid dues from your customers. This strategy helps alleviate cash flow problems and helps your business run smoothly. If you are interested in factoring occasionally, spot factoring might be the best deal for you.
What is spot factoring?
If you are in dire need of payment for the work already delivered, you do not have to wait until your customers pay. You can sell the individual invoice to a factoring company and get your advance. In this case, spot factoring gives you better control over the arrangement. It allows you to choose the batch of invoices you factor in.
How does spot factoring work?
This factoring involves a simple process. You first sell your invoices to the factoring company for a particular percentage of the total amount. They verify your invoice and work on a strategy to secure the best rates. The company advances you the money immediately, and then they earn it back as your customers pay the invoices. When the invoice is due, the funding company uses its credit management process to contact your customers to ensure they serve the invoice on time. The spot factor pays you the remaining amount of the invoice after subtracting the agreed fee.
When can my company use spot factoring?
Every company has its reasons for using spot factoring. You can use it to reduce cash flow pressure while enhancing your operations. You can also use it for the expenses associated with high growth rates, to cover increased production rates, and take advantage of better business opportunities. Further, you can use it to cover operational costs associated with a slow quarter and to bridge the cash-flow gaps from delayed payments.
Why should I choose spot factoring?
Single invoice factoring might be the easiest way to get capital outside the standard billing practices. For one, there is no long-term commitment because you choose when to sell your invoice and which invoice to use. The paperwork involved is fast and straightforward, meaning you can get your cash in as little as one day. Better still, there are no loan payments to worry about.
What are the best practices when spot factoring?
If spot factoring is the right fit for your business, you must first understand why you need it. This helps you identify how often you’ll need the factoring and use it in the right way. It is also crucial to research to find a factoring company suitable for your business. If you are in a trucking business, you’ll want to work with a company specializing in truck factoring. It is also important to choose a well-established company that charges reasonable rates.
If your company needs cash to continue running and fuel growth, spot factoring is an ideal solution. At Business Factors & Finance, we provide spot/ non-recourse factoring with zero monthly minimums. Our team walks the extra mile to assess your situation and tailor an arrangement that suits your company’s needs.