What do spot factoring companies do? Judging by their name, they’re financial firms that factor our receivables or invoices. In other words, they provide an advance of their value even before they mature allowing companies an immediate means to cash.
These providers have been labeled as lifesavers and more but if we were to summarize them in five words, it’ll have to be the following adjectives: redeeming, quick, debt-free, relieving and helpful.
As mentioned, they are lifesavers simply because they provide that needed bag of blood to an organization in need of it. Remember that money is the lifeblood to any organization and without it, nothing would and can work. Operations would be put on halt. 2. QUICK
This service is unlike any other because spot factoring companies can provide for the financial resources in such a short amount of time. Think twenty-four hours quick! Yes, you’re eyes aren’t fooling you. These providers can release cash in as little as a day’s time which is a very stark contrast to majority of the options available in the market today. Additionally, it doesn’t come with as much requirements and restrictions. 3. DEBT-FREE
Spot factoring is a service that comes free of liabilities simply because it isn’t one. It’s an asset transaction which involves the sale of the right to collect against an invoice/s. It doesn’t require asset-based or property collateral, comes free of interest (simple or compounded) and reflects in the books as a decrease in receivables, an increase in cash and a debit to an expense account for the fee involved. 4. RELIEVING
In a world where financing, especially emergency and immediate ones, are very hard to attain, spot factoring companies makes it easier not only for the established organizations but also the startups, small to medium scale enterprises and even recovering entities that do not have the capacity to take on other financing options like bank loans and mortgages due to their strict requirements. They’re a breath of fresh air and a hug relief for users. 5. HELPFUL
Of course if we were to end this list, we’d have to use this adjective to define spot factoring companies. Indeed, these firms have been a huge help in raising additional and immediate capital without the hassles and strings attached to a debt. They help reduce bad debts, hasten collections and even remove the burden of such administrative task. They’re very helpful to entrepreneurs and even that is an understatement.
Spot factoring companies have thrived thus further saturating the financing market. Is this even good? For customers or clients, it sure is because the more providers there are the higher competition amongst them becomes. In return, this allows for better services at lower costs to users. But the challenge of finding the best and most valuable factors still remain. After all, it’s our job to filter the great from the mediocre.
How then can we tell if certain spot factoring companies are worth the trouble? Which ones are likely to helps us with our needs? To give you an idea, we came up with the following list. Read on.
First of all, a streamlined process is a great indicator. But finding out if a certain provider indeed has it can be a bit tricky. So how should it be done? A little research goes a long way and so does communication. They should be able to discuss their process and services with ease and consistency. Moreover, users should find it easy to understand them.
There’s the presence of great feedback too. In the world of marketing, word of mouth is the most powerful tool whether it’s something that falls under the more traditional or the digital type. Things like reviews, feedback and customer testimonials online (e.g. blogs, forums and websites) can speak legions about a spot factoring company. It also gives prospect clients a glimpse of what hiring them can result to. Having personal contacts recommending a provider can also mean good things but of course one has to take all these with a grain of salt. These are only a part of the equation and as mentioned, only serve to give us a glimpse not the entire picture.
The price is right. Nope not the game show but the idea is pretty similar. A worth it spot factoring provider should have reasonable rates. Cheap always raises red flags because quality never comes in discounted numbers nor does expensive guarantee quality. The keyword is reasonable.
Quality spot factoring companies also deliver on time, lighting fast to be precise. Because the service seeks to hasten collection and improve liquidity, hassle-free application process and a quick cash release make for a quality service. In fact, a day’s worth of time or twenty-four hours is considered the benchmark. If they can’t provide as quick as that then they’re not as good as they say they are.
A superhero refers to someone who has superhuman powers or abilities and uses them to fight crime or evil. We’ve seen them time and again from literature to film to television and print. They’re everywhere and we still adore them for obvious reasons. They save the day. In the business world, something comes quite close and it’s called spot factoring. As to why that is, we shall all find out today.
Considered to be one of the most versatile and easy to use financing methods there is, spot factoring allows companies to draw immediate cash from a particular sales invoice by advancing its value prior to maturity and collection in exchange for the right to collect against it. Now, why does it deserve the praise and honor it is given?
It’s as fast as “The Flash”. – It moves at the speed of light! Okay, maybe we’re exaggerating but in terms of finance, it sure does. You can advance the value of your chosen receivable within twenty four hours or a day’s time. You won’t achieve that with other available financing methods in the market.
It’s as smooth as “Bruce Wayne”. – More than his gadgets and his infamous bat mobile, Batman’s secret identity or should we say real life identity Bruce Wayne sure got chops in the business department. Like him, spot factoring is pro-business and seeks to help companies regardless of size and financial status. It puts a quick injection of cash in the working capital allowing for lesser opportunity losses and the pursuit of important projects. Not all entities can provide funds for projects at the moment every single time.
It’s as super as “Superman”. – What makes the best cash source? The mere fact that it is not a loan. Yes, you’ve read that right. You do not incur debt with spot factoring. As this is in no way a loan, it therefore does not increase your liabilities. You would not have to fear about the rising interests and the other strings attached to one. It is an asset transaction that only affects asset accounts in the company’s books.
It’s as precise as the “Green Arrow”. – In contrast to traditional factoring, spot factoring allows business entities to choose which invoice to use, when and how often. It is a onetime transaction that does not involve lengthy contracts. This means that there are no recurring fees and companies get all the liberty and flexibility they need.
Looking for a medium of financing is no easy job. With so many alternatives out there, people can get seriously lost. Confusion is something we’re all bound to face but that doesn’t mean that we can’t work around and away from it. This makes it important to understand each option before diving right through. Today we shall do exactly that by first getting to know more about spot factoring and what makes it a wise move.
Spot factoring falls under the category of receivables financing. It works by deriving cash from a customer or sales invoice. With this particular type, a specific invoice is selected. The rights to its collection are then traded to a financing institution called a factor in exchange for an advance of its value, often equal to at least 80% of its total worth with the remaining balance less the fees forwarded only upon collection from the owing customer. The collection function and all other responsibilities attached to it shall also be borne by the factor.
The reason why the method is often utilized lies in its various benefits as follows.
First, the cash is received almost immediately and prior to the receivable’s maturity. Some providers can even release the sum in as fast as a day’s time, something than no other type of financing is capable of.
Second, it hastens the collection. Businesses no longer have to wait for the invoice to mature before they can collect and use the cash. It essentially takes out the waiting game.
Third, it’s perfect for immediate needs. It cannot be denied that some invoices hold quite a significant value which can be used for an emergency expense or for purposes of operations and reinvestment. Because of its swift process, spot factoring is but the perfect choice.
Fourth, it strengthens liquidity and working capital. Because the locked up cash is freed almost immediately and prior to its supposed maturity, it injects resources into the system thereby improving working capital and liquidity at the same time.
Fifth, it is a onetime transaction. Spot factoring is selective in nature meaning that businesses have all the liberty to choose which invoice to use and when. There are no long term contracts involved so entrepreneurs need not fear of being tied to an agreement for a significant period of time. Plus, they have all the option to use it as often and as less as they want.