Spot Factoring for Small Businesses Helps Them Improve Cash Flow

Small businesses, especially those that are just getting started, often have trouble with cash flow. It’s a thrilling occasion to receive a large order, but when the customer doesn’t pay immediately, the organization may have difficulty accepting another large order because it cannot afford the inventory or materials. Access to spot factoring solves this problem.

About Spot Factoring

This type of financial support involves selling one invoice to a third party that pays the organization the money owed, minus a reasonable fee. Now the business has cash to buy whatever is necessary to take on that second large order and make more money. Without ongoing cash flow, the organization’s growth is hampered. Some of the biggest potential for growth comes in those early years when the business is just making its mark and catching the attention of prospective customers.

Standard Invoice Factoring

Standard invoice factoring is another service many small business owners appreciate. However, that agreement requires selling all outstanding invoices to the factoring company instead of spot-choosing which ones will be most advantageous to get off the accounts receivable books. The standard service is beneficial in many instances, but some business owners prefer to only have factoring for their largest outstanding receivables.

The Factoring Company’s Viewpoint

Many companies that offer spot factoring are glad to work with organizations in virtually any field, whether it’s construction, retail, manufacturing, service or something else. Factoring is not a loan but a different form of financial support. The factoring service is not taking on any risk involved with lending since they will be paid by the entity owing money on the invoice. They are likely to be more interested in the reputation of that entity than of the business they are buying the invoice from.

An Example

Consider subcontractors working for general contractors. Subcontractors usually are tradespersons like roofers, electricians, plumbers, and heating and cooling contractors. They have to wait until the general contractors get paid in order to receive their own payment. That can restrict their ability to take on additional work. With service from a company such as Business Factors & Finance, they can continue to accept new projects and build their income.