Learn the dos and donts in spot factoring here

1. Spot Factoring Do's and Don’ts
Spot factoring otherwise known as single invoice finance is
an effective tool that allows businesses to raise funds out of
their customer receivables even before dues have been paid
by them and any amount of collection was received.
This method of financing has become one of the most
powerful and sought after tools that enable the availability of
liquid funds in as short a time span as possible. It also
improves cash flows and working capital all while ensuring
that no debt is acquired as well as interests. But just like any other methods of raising
cash, it comes with its own set of dos and don’ts. Use them well and you benefit well.
Use them wrongly and you get a headache. Now what are these? Read up and find out.
Do understand terms and procedures. Although there are general standards for spot
factoring, each provider will still differ in one way or another. This makes it important for
you to understand their terms and procedures first before jumping on.
Don’t use it for each of your invoices. If you plan to factor out each or majority of
your invoices on the regular, let’s say monthly for a year, it would be best to get the
traditional factoring setup instead. This shall help you cut on costs and lessen
application time since you won’t have to do it again and again for the course of the
period.
Do get to know the provider first. You want quality and you can only achieve that if
you go for someone that offers it. This is why you must first research and read up on
information, reviews and feedback about the factors that you are considering.
Don’t forget your responsibilities. There are two types of spot factoring available for
you to choose. Recourse is where you are obligated to buy back and pay the provider
the amount of an invoice that was not collected from a delinquent customer. If you don’t
want this and you want to remove such risks then go instead for a non-recourse
arrangement which shifts the risk to the factor instead.
Do assess your invoices. Because spot factoring is a single transaction and will have
you choosing the customer invoice to subject to it, it is important for you to assess which
one to use. Obviously, you will have many of them on your records. Choose well.