Spot factoring is for companies that occasionally need additional working capital. This type of invoice financing is good for companies that have intermittent cash flow needs and do not need to borrow against the full value of the accounts receivable. Spot factoring companies typically do not have minimum usage requirement or term contracts, however, charge more expensive rates than general factoring companies.
Spot factoring clients are allowed to pick and choose what invoices they would like to factor. Spot factors will even allow clients to pick and choose invoices to a particular customer. While spot factors are happy to only fund one invoice at a time, they may require that the client have other non-factored invoices open at the time of funding. Spot factors will typically have a security interest in all accounts receivable and will look to other receivables in the instance where the invoices they have funded have been deemed uncollectable.
There are some spot factoring companies that will specialize in a specific industry. For example, there are spot factoring companies that specialize in transportation factoring, construction factoring and medical factoring. These companies can often be more flexible than general spot factoring companies as they have intimate knowledge of the industry.
This type of invoice financing is available through the traditional channels as well as some franchise models. Due to the lower work load related with spot factoring, entrepreneurs are able to leverage a franchise model to deliver invoice financing to local businesses.
Spot factoring is also available through online auctions. These online auctions are comprised of buyers and sellers of invoices that negotiate a rate and complete the process online. There are currently a few companies that offer this type of platform.
Spot factoring can be very expensive, however, the additional cost can be worth the flexibility for companies that do not have ongoing working capital needs. Companies that utilize spot factoring can easily transition to a full turn accounts receivable funding platform when cash needs become more significant.
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Customized Financing Options
Asset Based Lending
Revolving lines of credit up to $20,000,000
Accounts Receivable Factoring
No minimums, up to $20,000,000
Secondary lines of credit for ABL or Factoring
Equipment & inventory facilities
Great for staffing & temp agencies