What You Need to Know About Spot Factoring Companies

spot-factoring-companiesSpot factoring companies are considered saviors for many reasons. They’re busy entities as businesses would often flock to them for help in terms of financing.

As the name suggests, they offer what we call single, selective or spot factoring. A term referred to as the strategic process of obtaining financial resources against individual invoices. It involved the freeing of any locked up cash within a particular trade receivable by enabling companies to receive cash in advance on a single outstanding invoice prior to its maturity and payment collection.

But with all that said, there’s still more to know about this financing medium’s providers. Today is the day we all discover that by reading on below.

  • Spot factoring companies provide their clients their needed resources by financing client invoices as they are generated and as they are needed. It is because the method is flexible and providers allow for liberty, Entities get to choose and handpick which invoice to use. They also get to decide how often the transaction is called for and when it will be used.
  • They’re no loan sharks. In fact, they don’t offer any type of credit. That’s because spot factoring is first and foremost not one. It is not a debt and therefore does not come with the usual strings attached such as but are not limited to simple and/or compounding interests, collaterals and foreclosures.
  • Providers may or may not absorb risks. Depending on the arrangement chosen, entrepreneurs may be able to shake off any risks of bad debts and non-collection. With a “recourse” option, credit protection is waived. Businesses are responsible for buying back the invoices which have not been paid by its customers to the provider upon its maturity. On the other hand, a “ non recourse” option shifts the risk to the spot factoring company who shall bear all losses in the event that the customer to whom the invoice is attached to defaults or delays their payment.
  • They offer onetime deals. Many businesses feel hesitant to work with and tap spot factoring companies for help. They are afraid of getting tied up in lengthy contracts and ongoing commitments which in the long run can be detrimental on their part. The beauty of the method is that it is a onetime transaction, selective and single as its name would hint on.


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