The Advantages of Spot Factoring for Small Business Owners

Many business owners have heard about invoice factoring where businesses contract with an organization to pay outstanding accounts receivable bills so the company receives immediate cash instead of having to wait. Another option is spot factoring where no contract is necessary and the company only chooses this service as needed. Perhaps having fast payment for one particularly large invoice would be very advantageous, for example. This is a way of improving cash flow while giving the business owner more control of how the factoring service is used.

About This Style of Business Funding

Single invoice factoring is, essentially, a method of business funding. The invoices are actually sold to the organization, which pays the company and then waits for reimbursement from the original customer. Paying an affordable fee for the service is well worth it to improve cash flow. That fee might be a small percentage of the total amount of the invoice.

Liquidity Problems for Small Businesses

Sometimes, being short on cash means a company cannot fill the next large order until the previous one has been paid. Sometimes, the company has the chance to expand because a new or existing customer wants to arrange for a substantial amount of work, but there may not be enough money to buy the necessary inventory or equipment to tackle the projects. These sometimes are problems for smaller businesses that don’t enjoy the impressive cash flow of large corporations. With limited liquidity, a small business has significant trouble competing.

Concluding Thoughts on Factoring Advantages

There are other options, such as small business loans, but many owners prefer the convenience of factoring with an organization such as Business Factors & Finance. With spot factoring, the service almost functions as a line of credit that can be used at specific times.

Bank loans at prime rates tend to cost less than invoice factoring does, but the convenience aspect is reduced and the chances of approval are as well. Business owners also may feel more of a sense of privacy and anonymity when choosing factoring, especially as compared with applying for a loan at local financial institutions.