In the majority of conventional invoice factoring connections the prospect uses the factoring facility on a frequent basis. Dependent on the client’s needs, they may factor invoices on a weekly or month-to-month. On the flip side,
a spot factoring transaction is a simple invoice transaction. The factoring company confirms to buy a single invoice as a 1 time purchase.
Both the transaction and the finance relationship end once the invoice is purchased. Businesses that use spot factoring generally do it because they only need to finance a single very large order.
While spot factoring delivers flexibility to its users, it’s also much more expensive than standard factoring. There are a couple of reasons why this is the case:
Invoice factoring companies see these transactions as more dangerous than conventional transactions. Usually, there are no additional invoices at hand (collateral) to add further security to the transaction. If the deal fails, the factoring company stands to lose their investment.
Invoice management charges for spot factoring transactions are increased because they need to go through the same setup and underwriting methods as a conventional transaction.
Spot factoring volumes usually tend to be unpredictable making it hard for factoring companies to plan their capital requirements and their revenues.
Minimum invoice size:
Most spot factors will only finance invoices that are larger than a minimum invoice size. Although this varies by factoring company, most require that the invoice be a few hundred thousand dollars or more.
The obvious benefits of spot factoring as a business financing solution is it’s versatility. It permits clients to work a single very large transaction without having to worry about any negative impacts to their cash flow. Visit NeeBo Capital today and get a low rate on spot factoring.