Updated: 1st February 2016
Single invoice finance, also known as spot factoring, is a flexible and affordable way to raise money against your customer invoices. In principle, it’s the same as standard invoice factoring, but offers advantages to certain types of business.
If your company doesn’t require a constant source of working capital, carries out large projects, or only has a few customers, then spot factoring might be for you. It’s a quick and reliable way to obtain a cash advance on invoices if your customer is creditworthy, and has a good reputation for paying on time.
The system is basically the same as for ongoing invoice funding, but you are able to choose which invoices to factor, rather than ‘selling’ your entire sales ledger to the lender. You send your invoice out as normal, with a copy to the factor, who advances a proportion of the total amount – usually between 80% and 90%.
The factoring company carries out all required credit control procedures, and when full payment has been obtained, sends you the remaining balance less fees for the service. Like ‘traditional’ factoring and invoice discounting, it’s a relatively low-risk process – your lender is advancing monies on the basis of work completed, and you gain access to working capital without taking on massive debt.
Spot factoring would be of great benefit to seasonal businesses that don’t need a year-round finance facility. If your cash needs vary from month to month, or you take on fairly large projects, your business can enjoy all the benefits of invoice finance without the need to pay ongoing fees or enter into long contracts.
Selective invoice discounting is also popular with businesses that only have a single large debtor. Being able to raise working capital intermittently through the year based on the sale of one invoice at a time, offers valuable flexibility, as does not having to wait the normal 60 or 90 days for payment.
Single invoice funding is a specialist area of lending, but as with regular factoring and discounting, there is no requirement for your business to have an impeccable credit rating. Lenders focus more on your customer’s expected ability to pay their invoice. Additionally, there is little paperwork to complete.
The best way to find an appropriate lender is via a broker or agent who isn’t tied to specific factoring companies. A reliable broker can provide independent guidance, and industry-specific knowledge in some cases.
Real Business Rescue can help you decide whether selective invoice finance is preferable over factoring your entire sales ledger. We provide impartial and independent advice, and can help you attain finance quickly using our long-established links within the industry.