Spot Factoring is a form of invoice finance which allows you to borrow funds against single or selected invoices.
The more traditional facilities, such as Invoice Factoring & Invoice Discounting, require you to borrow funds from all or the majority of your invoices. Spot Factoring allows you to simply pick and choose individual invoices to fund against.
This product works well for businesses with one or two slow payers, or if you have a large job on extended terms. It has no contractual tie in, and you will simply pay for funds you borrow from the facility.
This product is more expensive than the traditional products, but it gives you a level of flexibility you do not get with others. You only borrow funds you need to borrow, and there are no fees if you don’t use the facility.
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How it Works
Spot Factoring lets you borrow funds from your unpaid customer invoices, without the obligation to put all or the majority of your invoices through. You will receive two payments from the lender. The first payment will be the initial bulk payment against the total invoice value, which is known as the pre-payment percentage. The second payment is the remainder of the invoice, minus the agreed upon fee. This is known as the residual balance. Your customer will pay the lender back directly. The basic steps of Spot Factoring are:
- Firstly, you would send an invoice to your spot factoring company. They would advise how much they could advance on the invoice.
- Once the agreed amount of funding is available, the lender will contact your customer to verify the invoice is correct.
- Once the invoice is verified, your spot factoring company will advance the funds to you.
- Your spot factoring company will then chase your customer for payment of the invoices which they have advanced funds against.
- Once payment has been made by your customer, you will receive the remaining balance of the invoice, minus the agreed upon fee. There is no obligation to draw more funds from the facility at this stage.
To see your Spot Factoring options, use our FREE quote form.