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What Is Spot Factoring?
Spot factoring allows a business to sell its invoices to a third party selectively. It gives more flexibility as the business decides which invoices to sell on a one-off basis. Spot factoring is also known as single invoice factoring or selective invoice factoring.
After the agreement, the spot factoring company pays a significant portion of the invoice value (usually 75-90%) in advance for a fee. The rest is released once invoices have been paid in full.
The key benefit of spot factoring is that a business can sell the invoices for which it is expecting delays in payments to solve its cash flow problems.
How Does Spot Factoring Work?
Spot factoring works in 3 easy steps:
Handpick your invoices: Spot factoring is your tailored financing solution. You select specific invoices—only those you need immediate cash for—for selling.
Get instant cash: Once chosen, those selected invoices become your ticket to instant cash flow. The factoring company converts a huge portion of these chosen invoices into working capital.
Fuel growth: Use the working capital to finance your future growth. The factoring company will release the rest of the payment once the selected invoices are paid in full.
Other types of factoring:
Account receivables factoring is used interchangeably with invoice factoring. It involves the business selling its unpaid invoices to a third party (factoring company) at a discounted rate to receive early payments. Upon receiving the invoices, the factoring company releases the bulk of payments (up to 90% of the collective invoice value). The rest is paid (after fee deduction) when the payment is collected in full from the end customers.
Reverse factoring, also known as supply chain financing, is a three-way agreement between a supplier, a buyer, and the factoring company. The factoring company pays the supplier on behalf of the buyer, offering quick payments at a discounted rate.
In recourse factoring, the business that sells its invoices to a third party remains liable if the customer fails to pay the invoice. If the customer defaults, the business must buy back the invoice or replace it with another. The risk of non-payment remains with the business.
With non-recourse factoring, the factor assumes the risk of non-payment by the customer. If the customer fails to pay due to insolvency or credit issues, the factor absorbs the loss, and the business is not responsible for repayment.
Debt factoring, also known as receivables factoring or invoice factoring, involves a business selling its accounts receivable (unpaid invoices) to a third party. The factoring company buys these invoices at a discounted rate, providing immediate cash to the business.
Sectors that Spot Factoring covers
Retail
Mechanics
Restaurants
Bars & Clubs
Leisure Clubs
Plus Many More
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With Spot factoring, you can
Improve Cash Flow
Convert unpaid invoices into immediate funds.
Fuel Growth
Use funds to expand, and invest in stock, HR, or equipment.
Invest in stock, HR, & equipment
Access capital for essential business needs.
Focus on High-Value Operations
Free up time by outsourcing collections.
Invoice Financing FAQs
Spot factoring offers distinct advantages over traditional invoice factoring:
- Control over which invoices to sell: You maintain control by selecting which invoices to sell, rather than committing to factor all invoices.
- Cost efficiency: Pay fees only for the invoices you choose to finance, potentially saving costs compared to blanket factoring fees.
Spot factoring can be a suitable option for small businesses that have a monthly turnover of over £4,000. It is one of the most reliable ways to inject quick cash into the business without taking a traditional bank loan.
When it comes to spot factoring, ComparedBusiness is here to help you save time and money. You can easily submit your business requirements through ComparedBusiness in under 2 minutes.
You will get quotes from top Spot Factoring companies delivered to your email. You can then compare and choose the most suitable option as per your business needs.