If you are company in need of cash quickly to cover cash flow gaps, fulfill an order, satisfy payroll demands or purchase new equipment, invoice factoring may be a great option for you to consider. Both spot factoring and standard factoring services provide you with the same financial outcome of getting cash you need right away, but they differ in exactly how they are used.
One-time Use vs. Regular Use with Factoring Services
All types of factoring receivables are dependent on the value of your current invoices. The invoice factoring companies will, in both instances, assess the creditworthiness and reliability of your current invoices. Once the value of these proofs of purchase has been verified, they will buy them from you giving you the cash you need in less than 48 hours. The key difference is single invoice factoring is a one-time-only use whereas standard factoring receivables occurs over and over again on a set schedule determined by you and the factoring company.
Some Industries Use Invoice Factoring Services on a Regular Basis
Often times, the nature of your industry or the specifics of your particular situation may determine whether you use single invoice discounting or not. Construction, manufacturing and transportation factoring generally occur on cyclical or planned schedule. This means that every month around the same time, for instance, you will submit your invoices to the invoice factoring company so that you don’t have to wait the 30- or 60-day cycle in order to get paid.
Single invoice factoring (or spot factoring), however, is for a business that will need factoring as a one-time thing often as a result of an unpredictable situation. In some cases, this type of financing requires a more thorough investigation and verification process by the financial company in order to best evaluate the invoices and their worthiness. Spot funding can still be processed quickly often with the same expediency as standard funding.
Specialists Can Help You Decide Between Factoring Options
If you are unsure which type of factoring services you will need due to upcoming changes in your business, talk to a specialist and they will help you decide. These specialists are focused on customer service because they understand this type of financing is new to a lot of people. They are happy to explain your options.
Spot factoring generally costs 3-8% of the total value of your invoices and is used when you just can’t afford to delay collecting on what’s owed to you by your customers. Though all factoring charge fees or percentages for their services, these costs are well worth it if it means fulfilling a large order, satisfying a key customer, or sustaining your business through difficult times.