Can Spot Factoring Help Small Businesses?

A new trend in business financing is called spot factoring. This new short term lending model allows small businesses to fill additional customer orders while waiting for previous orders to be paid. It is really frustrating to have a big order, fill it and then have to wait for the customer to pay before filling additional orders. This can cause orders to be canceled and business to suffer. But, now there is a way to avoid that situation.

What Is Spot Factoring?

A company called Business Factors & Finance has come up with the service of spot factoring. This is also known as spot funding or single invoice discounting. This is like a small loan to pay suppliers while waiting to be paid by customers. By getting this small loan, a company will have the money to pay suppliers and fulfill more orders for their products. This service is like companies who buy bad loans from banks at a discount and then collect them from the original borrowers. In this case, the company is purchasing a single invoice from their customer as the customer needs the service.

How Does This Work?

With this type of factoring or financing, a company submits a single invoice they need to be paid. The service verifies the invoice and gets basic credit qualifications. Then, they take on 100% of the responsibility of getting the invoice paid. They give the company who is their customer up to 96% of the invoice amount. This is because they subtract their fee from the amount their customer receives on each invoice. The customer gets less money but they get it quickly.

There are no up front costs or debt for the company who needs the money from the invoice. But, the company is sacrificing part of the money they have billed their customer. Sometimes it is important to get the money from a large past due invoice quickly. This spot factoring may be an answer for keeping a company’s cash flow healthy. Before filling product orders, the company should be vetting their customers to assure their ability to pay and credit history. But, sometimes even qualified customers take time to pay. Time the company can not afford. To find out more about spot factoring, please visit the website.