Call Us Anytime +1 (800) 672-3844
Funding Application
Client Login
Spot factoring is the sale of receivables to a specialized finance company known as a spot factoring company. It is widely used to obtain working capital for operational needs, purchasing supplies, or funding growth initiatives. Faster and less restrictive than traditional bank credit, factoring can often be completed within 24 to 48 hours with minimal documentation.
Spot factoring, also called single-invoice factoring, lets you monetize one or several invoices without a long-term agreement. It is frequently chosen by businesses that want short-term liquidity on demand or are exploring whether factoring is the right fit. Unlike high-volume arrangements requiring all receivables, spot factoring allows you to select individual invoices as needed.
How Spot Factoring Works
Access Capital When It’s Needed
Here's how it works:
-
Select an Invoice
Choose a specific receivable from a creditworthy customer to use for single invoice finance. You are not obligated to factor your entire ledger.
-
Submit for Approval
The factoring company reviews the invoice and the customer’s creditworthiness.
-
Receive an Advance
Typically, 70%–90% of the invoice value is advanced within a few days.
-
Customer Pays Invoice
Your customer remits payment directly to the factoring company on the due date.
-
Final Settlement
Once payment is collected, the remaining balance is released to you, less the factoring fee.
Costs and Fees
Understanding the Price of Spot Factoring
Spot factoring provides immediate liquidity on individual invoices. Fees vary based on the invoice amount, customer creditworthiness, and the length of the payment term. Transparent agreements allow companies to forecast financing costs with greater accuracy.
Before detailing fee structures, here is a comparison with other financing options:
How Spot Factoring Fees Are Structured
The fee structures differ by spot factoring company and contract. The primary cost is the discount rate, but some agreements also include charges for credit checks, transaction processing, or invoice verification.
Two common approaches include:
- Flat-Fee Spot Factoring: A fixed fee applied once per invoice.
- Percentage-of-Invoice Spot Factoring: A monthly percentage applied until the invoice is paid.
Knowing which model applies helps businesses calculate the effective cost and manage cash flow planning.
EXAMPLE 1
Consider this: a staffing company factors a $10,000 invoice with a 2.19% discount rate and receives the cash within 48 hours. The arrangement is non-recourse, so the company isn’t responsible for additional losses if the invoice goes unpaid.
If the invoice is collected within 60 days, the cost of factoring is $438, leaving $9,562 in net earnings.
The cost of factoring varies depending on the client’s credit profile, industry, invoice number, and dollar amount. For example, industries with higher dispute rates, like retail, may experience higher fees than invoices owed by state or government entities.
EXAMPLE 2
Consider this: you factor a $10,000 invoice with a 90% advance rate, receiving $9,000 upfront, while $1,000 is held in reserve. The factor charges a 2.19% monthly fee ($219). The arrangement is recourse after 90 days.
In this scenario, the company pays $219 monthly until the factor collects the invoice. If the invoice isn’t fully collected after 90 days, the invoice is returned to the company for repayment. The company can also choose to replace the unpaid invoice with another of equal or higher value.
Hidden Fees and How to Avoid Them
When reviewing spot factoring agreements, it is important to evaluate the total cost beyond the stated discount rate. Additional fees can materially affect the effective price of financing. Common examples include:
-
Invoice Verification and Monitoring Fees
Some providers charge for reviewing and validating each invoice. These fees accumulate quickly if multiple invoices are factored on a recurring basis.
-
Minimum or Commitment Fees
Certain agreements require a minimum transaction volume or impose charges if usage falls below a set threshold. This can reduce flexibility for companies with seasonal or variable receivables.
-
Administrative and Transaction Fees
Processing charges, wire transfers, and documentation costs may be billed separately. Over time, these items can significantly increase overall expenses.
-
Long-Term Contracts or Early Termination Penalties
Agreements that extend over multiple months may include early termination penalties. Exiting such contracts before completion can generate unexpected costs.
Practical Tips to Avoid Hidden Fees
Companies that use spot factoring effectively establish clear cost management procedures. Consider the following approaches:
-
Clarify All Fees in Advance
Request a complete itemization of potential charges, including verification, administrative, and transaction fees, before signing.
-
Select a Transparent Provider
Choose a lender known for clear pricing, fair practices, and strong client reviews. A trustworthy partner reduces the risk of unexpected expenses.
-
Monitor Factoring Activity
Track which invoices are factored, the associated costs, and the timing of collections. Internal monitoring helps identify patterns and ensures financing remains aligned with working capital objectives.
Why Your Business Needs Spot Factoring
Turn Your Invoices into Immediate Cash
For companies managing long payment cycles, spot factoring provides a reliable way to accelerate cash flow without increasing balance-sheet debt. Through single invoice finance, you can access funds in 24–48 hours and direct them toward payroll, supplier payments, or growth initiatives.
Spot factoring is not a last-resort measure; it is a working capital tool used across industries to maintain financial flexibility. Executives often rely on it to bridge timing gaps, fund projects with upfront costs, or manage seasonal demand without drawing down existing credit facilities.
The advantage lies in control. You decide which invoices to factor and when, without committing to a full receivables program. This flexibility helps preserve liquidity while maintaining operational momentum.
Delayed client payments can disrupt budgets and slow execution. Spot factoring allows you to unlock capital tied up in receivables so your organization can maintain stability and confidently pursue growth opportunities.
Industries That Benefit from Spot Factoring
Solving Cash Flow Challenges Across Multiple Sectors
Spot factoring is used by companies in diverse industries to align cash flow with operational requirements. Here are several examples of how it supports different sectors:
Freight & Trucking
Staffing & Workforce Services
Manufacturing
Agriculture & Food Production
Technology & IT Services
Oil & Gas Services
Which Model Fits Your Business Needs?
Both spot factoring and whole-ledger factoring provide accelerated access to working capital. The right choice depends on your company’s cash flow requirements, transaction volume, and appetite for contractual commitment.
Spot Factoring
High-Volume (Whole Ledger) Factoring
Spot factoring allows businesses to sell individual invoices to spot factoring companies as needed. It suits businesses with occasional liquidity gaps or seasonal working capital requirements well.
Benefits of Spot Factoring
- Immediate access to cash from selected receivables
- No long-term commitment or monthly minimums
- Streamlined paperwork, often limited to the invoice and client details
- Flexibility to choose which customers or invoices to factor
Common Risks Associated With Spot Factoring
- Discount rates may be higher than whole-ledger programs
- Availability depends on the credit strength of individual customers
- Frequent use can be more costly if cash flow needs are ongoing
High-volume factoring involves selling the entire accounts receivable ledger under a longer-term agreement. It is generally used by companies seeking predictable, recurring liquidity.
Benefits of High-Volume Factoring
- Lower fees per invoice due to economies of scale
- Consistent, reliable cash flow for ongoing operations
- Collection management often handled by the factoring company
- Suitable for firms with a broad and stable customer base
Common Risks Associated With High-Volume Factoring
- Requires a multi-month or multi-year agreement
- Early termination may trigger penalties
- Additional documentation, such as full financial statements and aging reports, is typically required
Here
We are here to provide you with the best options for all of your spot factoring needs.
But before we can do that, we need to ask a few simple questions. One of our premier customer service representatives will be in touch soon after we receive your information.
FAQs – Spot Factoring Lending
-
Is spot factoring a loan?
No. Spot factoring is the sale of receivables. Your business sells one or more invoices to a factoring company in exchange for immediate cash. Because it is not debt, there is no interest expense or repayment schedule recorded on your balance sheet.
-
What happens if a customer doesn’t pay?
It depends on the type of factoring arrangement. In a non-recourse agreement, the factoring company assumes the risk of non-payment, so your business isn’t responsible for unpaid invoices. In recourse arrangements, you may need to repay or replace the invoice.
-
Will using spot factoring make my business look financially unstable?
Not at all. Spot factoring is a common tool for businesses to maintain smooth cash flow and fund new projects. Most clients view it as a standard financial practice rather than a sign of distress.
-
Do I have to factor all of my invoices?
No. With spot factoring, you select the invoices you want to sell. This flexibility makes it appropriate for companies that only need occasional cash acceleration rather than a full receivables program.