Growth takes positive cash flow, and over the past few decades, it has become harder and harder to access a business loan or line of credit from the bank. Factoring your invoices may be the best solution to help your company grow.
When factoring is indeed your best option there are several things you need to consider, such as: “How much cash flow do you need at that time, how many invoices need to be factored” and, “How do I get the best rate?” Spot Factoring and Contract Factoring are the two main options you will consider when deciding what is financially best for your business. Both are great options, but one may be a better fit at certain times than the other. But which is best for your company?
Contract Factoring – Overview
Contract factoring simply means you factor ALL of your invoices for a particular project. Everyone knows, that when you buy in volume things are cheaper, and it is no different with factoring. Contract factoring offers lower finance rates and gives you continuous cash flow that you can rely on for growth over longer periods. If you are like most companies, you are bidding on many projects a week or month, not knowing if you will win one, two, or 10. Contract factoring continually boosts your cash flow, allowing you to take on those projects without worry.
Spot Factoring – Overview
As the name implies, Spot factoring allows you to cherry-pick the invoices you would like to have funded… as many or as few as you’d like, as small or large as you need. This allows for no long-term contracts, no monthly minimums, and no obligations whatsoever. If you need funding, you can call us. If you don’t, don’t.
The downside of spot factoring is that it tends to be a more expensive solution than contract factoring. And because it is single invoice-specific, the one-time funding does not give you continuous cash flow streams for future unknown situations.
Which is Best? Spot Factoring or Contract Factoring?
Both these options have their place… in the right situation. If you want to be more strategic needing only a small cash flow influx, then Spot Factoring is probably the right move. If you are looking for a little more money to help your current situation, then contract factoring would be the way to go.
Of course, a lot of math goes into the decision when choosing spot factoring vs contract factoring (or another solution). The details you share in your onboarding meeting will help your rep help determine which is the best fit for you. So, give us a call at 865-670-2345 or schedule a time to start the discussion. We are ready to help you determine which is right for your specific business’s unique needs.
NEXT STEP: How to Choose the Best Factoring Company for Your Business
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