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.
Factoring companies are one of the financial institutions that entrepreneurs head to when they need extra cash and capital for their businesses. The said entities provide services which we refer to as invoice or receivables factoring. This method allows entrepreneurs to sell the right to collect against their invoices in exchange for an immediate advance of their value. It is an effective means that isn’t time consuming or so much of a fuss to apply for. At the same time, it works for entities with increasing bad debts, poor cash flows, high levels of liabilities and financial problems.
Now, if you are planning to subject your customer invoices to the said service then below are a few things to ask your chosen factors before turning over your right against the collection. Read up and get to answering.
Question #1: How much can I expect to advance?
Each factor often varies in this department but you can expect around eighty to ninety five percent of the value of the invoices. It is of course best to ask and talk to many providers so you can weigh your options well.
Question # 2: Do you do single invoice factoring, monthly or both?
There are those who cater to factoring single invoices only while there too are those who only do a monthly or long term arrangement. At the same time you can find those that cater to both. You have to know your needs and at the same task ask the companies you talk to.
Question # 3: What are the fees involved?
This one will also vary from one factoring company to another. The service fee is an amount paid to the provider for the services rendered to them and is deducted from the amount that can be advanced. Be sure to ask what fees these are and what comprises it. You don’t want to be surprised so you better know for sure.
Question # 4: How fast can I get the funds I need?
The very charm of dealing with factoring companies is the fact that invoice financing can get your needed funds quicker than other funding options there are. Of course this does not go to say that every provider does this well. You have to scrutinize and ask them point blank about this. Get to know their process and at the same time you might want to read reviews and feedback on them too.
When invoice financing is the topic at hand it is expected that factoring and discounting will likely be items up for discussion too. Speaking of factoring, do you actually know what it is? If not allow us to give you a brief explanation. It is a receivables financing option that allows companies to sell their customer invoices to a factor for a discount or fee in exchange for an advance of the value on the said invoices. Here, the receivables portion of the balance sheet is converted to cash even before the plotted sate for which they are to be collected form owing customers. In essence it is a sale of a company’s assets. Today, many businesses make use of such method to improve cash flows, increase capital and decrease doubtful expense to name a few. If you are one of them then it would be best to know the qualities of reputable factoring companies.
PUNCTUALITY is a must. One of the reasons why companies decide to factor their receivables is to hasten the recognition of cash. If the firm is unable to do so in a timely manner then the very purpose of your actions will be foregone. We all know that time is an important factor in business and those who cannot deliver on time are dead weight.
CUSTOMIZED SERVICES is another. Not all companies belong in the same industry. Not everyone has the same transactions. They don’t sell the exact same products and offer completely parallel services. Businesses differ in one way or another making it a must that your factors should be able to provide you with a service that is personalized and custom built for you. Sure, the policies and other standard procedures will hold steadfast but there will be items that should depend on the company being serviced.
COMPETENT STAFF are necessary. As they say, a company is only as good as the brains behind it. No one can continue walking the path to success with an incompetent team. Make sure that the people and the professionals are indeed skilled and qualified as they say they are. Check for qualifications, licenses and even ask for previous experiences and services.
REASONABLE PRICING is also something to consider when looking for factoring companies. You surely do not want anyone to charge you with a price so high that it becomes so much of a burden. Make sure that they are too are not cheap now but expensive later. Always consider things at the long run.