All companies experience cash flow challenges at some point. The challenges are as varied as the many types of companies that encounter them. Whether yours are based on the season, time of the month, or another reason, spot factoring is something for you to consider.
Many invoice factoring options will have a 6-18 month contract. This way you know you can get the working capital you need at set intervals and the factoring company knows that they will be able to employ a certain amount at certain times for your use. Spot factoring is different; it provides you with a flexible financing option on your terms. It is invoice factoring only without contracts, minimums, or obligations. You get to choose what invoices to factor and when to submit them for payment, making it an option, not an obligation.
The downside is spot factoring is typically more expensive. Since it is a single or occasional transaction, the backend costs for the factoring company cannot be spread out over time. If the factor buys one single invoice from you without the guarantee of another transaction all due diligence costs, including searches and credit checks, must be covered in this single transaction. Because of this single transaction element, the implied risk is also higher for the factoring company. However, the other side to that is you only have to factor the invoices to meet your given cash flow needs. This makes it so you don’t have to factor invoices when you don’t need cash flow assistance and pay the discount on those.
If you have a need for factoring your invoices you need to find a factoring company and option that works best for you. If you are looking for a short-term solution to a cash flow challenge then spot factoring can be ideal giving you the flexibility you need. With spot factoring you simply call us when you need cash… the control is in your hands.
To find out how well spot factoring works for your unique situation, give us a call at 865-670-2345 or schedule a call-back.Back to blog