Single invoice factoring goes by many names, including spot factoring and selective factoring, but all describe the selling of individual invoices to a factor who will then make the majority of the value of said invoice immediately available to you. Factoring is a great way of accessing funds in order to free up cash flow, allowing businesses to re-invest or pay off costly debts in a timely manner.
Who Does It Benefit?
There are many reasons as to why a business would wish to access a single invoice factor’s services, so it stands to reason that many types of business might benefit from the practice.
Companies that have a single client can often benefit from the practice as they cannot provide the number of invoices to a factor that they require as a minimum for a normal factoring contract. These invoices will tend to be of high value, which is the most cost-efficient way of using a spot factor provider.
Another type of enterprise that is better suited to single invoice factoring are those working in “seasonal” industries, such as holiday accommodation. As typical factors require monthly usage, those that do all their trading in, for example, summer months, can only access spot factoring with this method.
If a business only requires access to invoices from a specific project, unless that project provides multiple invoices over a prolonged period of time, single invoice discounting may also be a preferable option.
There are no standard price structures regarding single invoice factoring as the process can differ wildly from case-to-case or provider-to-provider. Typically speaking, however, it does work out cheaper than a monthly contract factor as there are no monthly or administrative fees, although set up fees can apply.
Pricing for spot factoring tends to be transparent and much easier to understand than almost all other methods of funding, including monthly factor contracts. This allows for a high degree of peace of mind when planning your finances as well as trust in the process and provider.
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Advantages and Disadvantages
As with any area of funding, there are inherent pros and cons relating to the process so it pays to understand what these may be before deciding if single invoice factoring is right for you. Each provider does present its own set of specific terms and conditions so this needs to be taken into account as well before generalising about the practice as a whole.
Many factors require a degree of control regarding your financial interactions with your clients if you sign a monthly contract with them. Single invoice factors do not require this level of control over the process as it is a short term method of funding.
Another advantage with accessing this type of funding compared to contractual factoring is the value of the invoice made immediately available is much higher, up to 95%. Both methods release the remaining value of the invoice once it has been paid by your client, minus a fee.
At the heart of the process is the ability for businesses to access funds as and when they need it, meaning they are not tied down to contracts that can be restrictive and problematic. It should be noted, however, that some providers do require contracts that tie your business to them and the risks inherent in this should be known before committing.
Single invoice providers are not best suited to businesses that require some degree of assistance for debt collection. What makes them attractive to some, the lack of interference from the factor, might therefore be disadvantageous to others
Although the fees are lower than those encountered by monthly contracts, the percentage of the value of your invoice is much higher, meaning it is not suitable for continual use.
While some of the risks relating to contracts are usually avoided by accessing spot factoring, not all services are the same. Some of the most highly regarded providers include:
- Catalyst Finance
- Ashley Business Finance
Founded by experienced business leaders, not bankers, Catalyst provide access to funds that many businesses would otherwise find difficult to obtain. Specialising in spot factoring, they are one of the most trusted providers in the UK with a growing base of customers across a wide variety of sectors.
Ashley Business Finance
Ashley Business Finance are one of the major providers of invoice financing in the country, but it is less well known that their single invoice factoring process, Raiseit, is also one of the most affordable. What’s more, it is highly accessible, with all applicants judged by the financial capabilities of your client rather than your credit rating.
IGF were founded in the mid 1990’s and have since gone on to become one of the leading providers for small businesses in the UK. With governmental backing, but independently run, they consider businesses from all sectors. All fees are provided upfront and discussed face-to-face. The entire process is transparent and highly efficient, with funds made available within 2-3 working days.