What is spot factoring?Spot Factoring and Selective Factoring describe the process of raising finance against individual invoices. It means releasing cash locked up in invoices, one invoice at a time. Spot factoring or single invoice factoring is a new alternative to traditional wholesale factoring facilities.
- Spot factoring facilities provide greater flexibility and enable you to sell a single invoice or bundle of invoices when you need it most
- Without entering into lengthy and potentially expensive contracts
- Spot factoring allows faster access to capital
Spot factoring is defined as the purchase of a single “once off” invoice as opposed to full or repeat factoring. If not disclosed, it can be known as selective invoice discounting. A defining feature of small and medium sized businesses in the UK is the volatility of their monthly cash flows. Traditional factoring can be ill-suited to these cash flow fluctuations: minimum monthly fees penalise companies at times when they do not need to draw down on funds.
What are the draw-backs of whole-turnover factoring?
- Loss of control of your credit function,
- Overly aggressive chasing of your outstanding invoices which damages client relationships,
- Prevalence of all-asset debentures and personal guarantees as security,
- Exclusion of certain classes of invoices which limits actual funding provided.