the ideal factoring client.
The ideal factoring client is basically a small to medium sized business that's looking for short term financing and can't get approved through a bank or already has a line of credit or a loan that's maxed out and can't go any further with it. They have lots of accounts receivables or invoices standing around for work completed that they haven’t been paid on. Because of the current economic circumstances, delays happen constantly.
How does the application process work?
The spot factoring application process is definitely simpler than any bank or standard factorer that you could look at. With some factoring companies, a spot factoring application is only one page long. That's it... more>>
Can a new company, say three months old, qualify for factoring?
Yes. Most likely a newly started company would need to provide bank statements for the past three months. The spot factor would probably ask them for signed contracts from future projects that they have signed up for that they are planning starting work on or have already have started work, but may not have invoices for... more>>
If a company’s credit isn’t excellent, can they still use factoring services?
In many cases, yes. With factoring, clients are approved based on their customer or debtor's ability to pay. In other words, the factoring company is not just looking for them to be qualified enough to pay those invoices, rather they need them to be qualified enough that they're not going to go out of business tomorrow... more>>
Why cash flow benefits of factoring are among the most important to small business.
A large number of factoring clients have been working on small projects for years, and all of a sudden they get a large project. They've just completed work on the first invoice. They need the money because they invested all their money, personal assets, into making this one project work... more>>
The cost of factoring compared to the cost of a bank loan.
If the small business can get a bank loan, they should go that route in most instances. Many factoring prospects apply even while they are in the process of getting approved for a bank loan. Which, by the way, of course, can take months... more>>
Spot factoring and invoice factoring, are they the same?
Not exactly. Spot factoring and invoice discounting are the same thing. But spot factoring is rare. With spot factoring, the difference is that, again, the small business in not getting locked into a contractual relationship.... more>>
What’s the most misunderstood thing about factoring?
The biggest concern small business factoring prospects have is, "Oh, you're going to contact my customer? I don't want the relationship between me and my customer to be jeopardized." That's a misunderstanding because if the small business is doing well enough to be pre-qualified... more>>
Even though spot factoring can be limited to just one transaction, what percentage of factoring clients do one-offs?
One-offs are very rare. I think that speaks to the service and quality of service. Clients love the speed with which factoring works. Invoices can be turned around within 24 hours into cash in their bank account.... more>>
What are the rates for factoring?
At first glance factoring rates are high. But in comparison to the rates you're paying at the bank, which you have to pay continuously, it's not a situation where you have an invoice and it's out for 30 days and you pay for the 30 days and then that's it.... more>>
Does factoring work on a long term basis?
Recently a client who has been working with a particular spot factor for almost five years now, came to them to buy out his bank line. The factoring company asked, "Tom, why would you want to do that?... more>>
How little of an invoice can I get funded?
There really is no minimum. Spot factors have funded invoices that are $500. There is no minimum amount of invoice. That's the great thing about spot factoring. You don't have to sit around looking for minimums and meeting minimum requirements. There are no minimum invoice requirements.
How quickly can I get funded?
With spot factoring, it’s possible to receive funding in 24 hours from the time you apply. Of course, this is contingent on you having the necessary financials (balance sheet, income statement, A/R aging summary and A/P aging summary.) The faster you get the factoring company the information and documentation they need, the faster you can get funded.
Does anybody do factoring for the construction industry?
Most factoring companies do not service the construction industry. But, just as some factoring companies specialize in servicing the medical industries, or credit card transactions or freight industries, a few factoring companies do specialize in servicing the construction industry... more>>