Is it Time to Consider Spot Factoring?
You may well be aware of factoring and invoice discounting as types of invoice finance as they have been around in the UK for a number of years however spot factoring is a relatively recent introduction to finance in Britain although it has been around in the USA and other countries for a number of years.
What is spot factoring?
Spot factoring is also known as single invoice factoring or selective factoring. It is essentially similar to traditional invoice factoring but differs in that it is an excellent choice for those businesses that find their working capital requirements vary month by month.
What is the difference between spot factoring and other invoice finance methods?
Unlike traditional factoring that may require a business to sign up to a 6-12 month contract, with spot factoring a business can simply choose which invoices to ‘sell’ and when.
Key advantages of spot factoring
● No long term contracts – With other invoice finance methods, you can often be asked to enter into contracts that can range from 6-12 months or even longer. With spot factoring, you can choose which invoices you want to ‘sell’. This means that you can boost your cashflow when and whenever you want without being tied into a long contract.
● No minimum fees. With traditional factoring you are often contracted to pay a minimum fee amount per auunum but with spot factoring there are no minimums so if you don’t use the facility you will not pay anything.
● No chasing payment – When comparing spot factoring with invoice discounting, spot factoring gives you more time to get on with the running of your business. This is because the responsibility of chasing your debt is passed on to your factoring company. Chasing debts can be excessively time consuming so this is a key differential.
● Excellent choice for new businesses – Finance can be hard to come by for new businesses. This is because new businesses may find it difficult to pass a credit check thanks to a short trading history. Spot factoring however doesn’t require a business to pass a credit check (although its clients may be required to pass one). This means that as well as being an excellent choice for new businesses, spot factoring can be an excellent source of finance for businesses with poor credit ratings.
● Flexible – Single invoice factoring tends to be a very flexible way of accessing finance which makes it a very popular choice for many businesses. It can be a little bit more expensive than invoice discounting or factoring, it isn’t always and it can be possible to get as much as 95% of your invoice from the spot factoring company.
How do I access spot factoring?
There are a number of single invoice finance companies that operate in the UK. All of these companies may operate in slightly different ways and you may find that certain spot factoring companies are more suitable than others. Here at Factoring Solutions, we have excellent relationships with these companies and can advise you on the company and package that best suits your needs.
If you would like to chat more about spot factoring or would like to ask questions about this exciting new source of business finance then call us on 01827 707680 completely free of charge as we don’t charge anything for our advisory services at all.