Selective invoice factoring, also referred to as spot, is a type to receivables financing where businesses get to advance a major percentage of the value of their sales invoice from a third party financing agent. It comes alongside other business financing types such as loans, equity financing, asset based lending, purchase order finance and merchant cash advance. What separates single invoice factoring is its characteristic where it allows companies to raise capital without any debt involved. Plus, it is to be noted that only one invoice of your choice will be subjected whenever you want to. Now you wonder. Who uses it then?
UP AND COMING BUSINESSES: Most businesses in every industry that has recently started or are still building on their organization often find a hard time raising their needed funds during their first years. The reason is because they have not acquired as much assets yet which are requisite collateral for banks and other lenders. As an option, they are given the chance to do so but instead of borrowing they sell their invoices instead thereby hastening the recognition of cash which they may use to pay suppliers etcetera.
THOSE IN NEED OF CASH: There are a lot of established companies who despite of outstanding sales do not have enough cash. How come? Customers do not always pay in cash. In some instances, they pay on credit therefore cash is locked up. Selective invoice factoring is a good answer to this dilemma.
ENTITIES WITH LONG RECEIVABLES: To hasten up a certain receivable which could be large in amount and whose value can provide for a present need, companies who have long receivables make use of it too.
THOSE WHO WANT TO AVOID DEBT: Not all receivables are paid on time. Others do not even get paid at all and thus bad debts. These are inevitable and cannot be avoided unless you do not offer credit. By using a nonrecourse type of factor, you shift such risks and losses to the financing agent.
COMPANIES WITH EMERGENCY EXPENDITURES: Lastly, selective invoice factoring can also be used by companies who have urgent expenses. These can be anything from buying new equipment, repair of a major machinery used for production, cash shortage to provide for employee salaries and wages and practically any other operating expenditure. You never know when you have to disburse an amount vital for the continuation of operations.