Questions to Ask Yourself Before Using Spot Factoring

spot factoringSpot Factoring is an arm of Receivables Financing that enables business entities to choose a sales invoice and advance its value in exchange for the right to collect against it, all before the owing customer sends in partial or full payment.

Truth be told, it is a very powerful tool that comes with a slew of benefits making it one of the most laudable finance mediums of today. It is used by many entities, regardless of type, size and industry. But just like anything else that involves financial matters, it has to be taken with a grain of salt. After all, there’s no one size fits all method and its effects can be different from one user to the other. Research and analysis has to be done first in order to assess if it really is the method that suits the company’s needs best. With that said, we’re giving you 5 questions to ask before bringing Spot Factoring into play.

1.    “Do I understand how Spot Factoring works?”

It is crucial that you do or else it would be impossible to make a good decision. One cannot fully determine its feasibility if one could not grasp its processes, purposes, costs, perks and drawbacks.

2.    “Which receivable will I use?”

Spot factoring is a one-time transaction. The company has the liberty to pick which receivable to use and when. Of course, opt for one that’s of significant value and will cover for your needs. Make sure that the customer is creditworthy to ensure a higher approval rate.

3.    “Where will the funds be utilized?”

Define the purpose of the fund. One simply cannot advance just because. There has to be some valid reason behind it and once the cash is received, it has to be allocated accordingly to ensure maximum use and zero wastage.

4.    “How fast will the cash be released?”

The strongest charm of Spot Factoring lies in its ability to derive cash almost instantaneously. Many providers are able to do so within twenty four hours but this isn’t true for all so inquire first before you decide on anything.

5.    “Is the provider trustworthy?”

Always choose a quality Spot Factoring provider. Research the area for companies that offer the service and run a background check on them. Look for any reviews and feedback and pay them a call and a visit to discuss available services and terms. Don’t jump on the first provider you find.

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