Spot factoring explained

Want to fund individual business invoices? Spot factoring could be the solution for a fast access to finance. 

  • Get cash from your unpaid invoices

  • Choose which invoices to finance

  • Outsource your business credit control 

Use Capitalise to find your spot factoring options

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What is spot factoring?

Spot factoring is a type of invoice finance. This solution provides businesses with quick access to funds by financing individual invoices. 

A business will choose to factor individual invoices on a case-by-case basis. This can be a useful option if there are significant differences between the values of the invoices you raise.

The key difference between spot factoring and the similar financial product, selective invoice finance, is that the provider takes ownership of your credit control. This means they will handle your credit control function for the invoices you choose to finance.

How does spot factoring work?

Spot factoring is an easy way to access cash owed to you in invoices. Here’s how it works: 

  1. Forward the raised invoice to both your customer and your spot factoring provider.

  2. The spot factoring provider will transfer a percentage of the invoice value to your business bank account. Many lenders now offer sales ledger management systems which can integrate directly into your existing accounting software, adding greater fluidity and accessibility throughout this process.

  3. The spot factoring provider will chase up the outstanding invoice on your behalf in a professional and courteous manner. 

  4. You'll then be forwarded the remaining balance, minus fees and interests, leaving you free to advance additional invoices further down the line.

What are the advantages and disadvantages of spot factoring?

Advantages of spot factoring

Disadvantages of spot factoring

Your business won’t be locked into a prolonged relationship with your customer, giving more freedom to adapt your financing strategy as the business evolves.

While spot factoring provides quick access to cash, there are fees that incur which could affect your profit margins.

You get to choose which invoices to finance. This means businesses can avoid factoring invoices from customers that have a history of late payments or other issues. This reduces the risk associated with non-payment or disputes.

When your business uses spot factoring, you give control over the collection process to the invoice factoring provider,  which could impact your relationship with that customer.

Spot factoring provides an immediate injection of funds into your business. Instead of waiting for customers to pay their invoices, you can access a portion of the invoice amount upfront.

Spot factoring can involve higher fees compared to invoice factoring where multiple invoices are factored.

Which businesses are eligible for spot factoring?

Spot factoring is only suitable for companies that raise invoices to other businesses. This means it might not be suitable for companies that operate as business-to-consumer, such as  ecommerce, retail, or merchant businesses.

To be eligible for spot factoring, your business will need to:

  • Raise invoices to business customers

  • Have creditworthy customers 

  • Want to give credit control to the factoring company

  • Only want to finance one or some of your invoices, not the whole debtor book.

Why choose Capitalise for your spot factoring?

  • Fast access to finance

    Draw down funds in as little as 48 hours, so your business can get the cash it needs fast.

  • Easily compare multiple lenders

    With access to over 100 UK lenders, you can quickly compare all your options to find the best fit for your business.

  • Expert support every step of the way

    Our team of dedicated funding specialists are always on hand to answer any queries and support your application.

  • Search across a full range of funding products

    Beyond spot factoring, discover other funding solutions that suit your business needs, all from your Capitalise account.

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