These two words may sound a little foreign to most people but definitely not to businesses. Single invoice or spot factoring is the strategic process of raising financial resources against individual invoices. Here, cash is released which are still locked up. It is a business financing solution which enables a business to receive cash in advance on a single outstanding invoice. Companies involved in this provide their clients their needed resources by financing client invoices as they are generated and as they are needed.
There are some companies which are hesitant about factoring as they are afraid of getting tied up in lengthy contracts and on going commitments which in the long run can be fatal to them. Here the beauty of spot factoring comes in. It is a one time basis and unlike other factoring contracts, they won’t hold you down for far much longer than you would want to.
When looking for spot factoring companies there are three essential elements for you to consider and to study about. The first two are the size and amount of your invoice while the third is about customer impact.
These said companies will check upon your invoice, confirm that your products or services have indeed been delivered or rendered and then underwrites the credit worthiness of the debtor. When these are accomplished, they will advance a percentage of the invoice to the business which will depend upon the agreed proportion. The balance will then be released when the invoice has been fully paid.
Companies use this for several different purposes like unexpected expenses, the need to fund an important and urgent project, for extra income, a boost in employee morale, opportunities for growth and a better chance at reaching out and influencing the general community. Do know that those are only a few of the many things companies encounter that make them need spot factoring.
Whenever businesses urgently need financial resources for whatever reason and cash is not readily available, they would often reach out to banks or lending institutions where they acquire debt. This has been a common practice but is often frowned upon as a heavily indebted company is in very risky waters. When credit risk is so high, investors can get skeptical and scared that they might withdraw. So most companies would then turn to spot factoring. It does not incur them any debt and at the sane time it provides them with the resources they need.