Spot factoring is a type of facility which allows businesses to fund cash flow by selling an individual invoice or debtor to a third party (a “factor”).
Unlike traditional invoice finance facilities you do not have to finance your whole sales ledger and can be selective with the specific invoice or debtor you require funding against.
Spot Factoring is a simple facility and therefore costs are very transparent.
Spot Factoring can be provided on a confidential basis which means your debtors are unaware of the facility, or it can be provided on a disclosed basis which means the lender will complete the credit control function on your behalf.
Why use Spot Factoring
The key reason for using Spot Factoring is to help increase cash flow and to avoid having to wait between 30 and 90 days to get paid.
Spot Factoring allows you to receive funding against your invoices on day one. Once goods / services have been delivered or completed our panel of lenders can advance up to 90% of the invoice value (less fees).
This helps your businesses cash flow, to pay suppliers and other outgoings. The remaining 10% is forwarded to you once the debtor has paid their invoice.
How does it work?
The business raises an invoice and then notifies this to the Spot Factoring lender per the terms of the agreement.
The lender then advances a percentage of the invoice value up front to the business which can be as much as 90%.
When the debt becomes due the lender may undertake some credit control duties to obtain payment.
The key advantage is to help release funds which are tied up in unpaid invoices to assist with cashflow.
A business is able to pick and choose the invoices or debtors which they would like funding against.
As payment terms are on the increase Spot Factoring takes out this issue and enables businesses to use the funds which would otherwise not be available to be used elsewhere in the business.
These extra funds can be uses as a cash boost or simply to pay suppliers on time, pay wages or inject cash into a new project, office or product.
Disadvantages of spot factoring
It can be seen that lenders will often charge a premium for the flexibility on offer. If used very regular or for a whole debtor book a traditional Invoice Financier would be a better solution.
The set up time is approximately 1-2 weeks depending on the lender.
IF YOU WOULD LIKE MORE INFORMATION GET IN TOUCH WITH ONE OF OUR FUNDING EXPERTS TODAY
All Star Funding Solutions Limited
2 Mount Street, Manchester, M2 5WQ
Office Tel 0161 8211478 Mobile 07771 430740
Please find below our specialist areas:
- Asset Based Lending
- Business Loans
- Cashflow Finance
- Invoice Discounting
- Stock Finance
- Credit Insurance
- Trade Finance
- Credit Insurance
We operate throughout the UK but have built strong relationships in the following areas
Manchester, Leeds, Liverpool, Sheffield, Preston, Newcastle, York, Chester, Birmingham, Warrington, St Helens, Wigan, Bolton, Bury, Bristol, Southampton, Cardiff, If your business requires funding then we can help you find the solution