Posts tagged: spot factoring companies

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.

How to Get the Good Spot Factoring Companies

When it comes to raising capital for a company, a popular option among many entrepreneurs is single invoice or spot factoring. This is nothing to be surprised at as such funding method do have its perks. To name a few, here is a brief list:

• It is a quick and simple process.

• It improves cash flows without an added factoring companies

• It does not involve interests and therefore costs less.

• It leverages instead on customer’s financial status.

• It makes the company more liquid.

• It is not a form of a loan.

Now that you’ve had a little refresher, here a few ways to help you land on the good spot factoring companies to suit your financial needs:

• Invest on a good research.

We all know that in everything, planning is a key to success. Failure to do so can be catastrophic. Research is part of planning and it is therefore a must if you are looking at spot factoring and its service providers. Before getting on the engagement, you first have to understand its key concepts and how much of an impact it can do your company. Furthermore, you have to research well on who are the best factors in town, who are suited for your business and its industry.

• Ask your consultants and business advisers.

Do remember to go and talk with your advisers and consultants. Your financial analysts may have an opinion on the matter too. With the nature of their job, it is likely that they know of a few financial institutions that are in good standing and provides the best services. Also, they will be able to guide you in choosing certain options as well.

• Get some professional, reliable and unbiased references.

When asking around from colleagues, businesses partners and from acquaintances in the industry, see to it that their recommendations are free of bias. Their opinions should be backed up by experience and knowledge. For sure, some of them may have already subjected their invoice to spot factoring. Ask them about their experiences both good and bad. Pick up some useful information.

• Go on the World Wide Web.

Of course, the internet goes a long way. You can easily find spot factoring companies by simply typing on the search bar. To benefit best from this, make sure that you have read all the necessary terms, conditions and other related information to help you get to know these entities best.


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