Spot factoring

Quick facts

Spot factoring is a type of selective invoice finance, i.e. a way of borrowing money using your unpaid invoices. It’s similar to selective invoice discounting in that it allows you to finance specific invoices (or customers). The lender will take over credit control for your selected customers.

Spot factoring, like selective invoice discounting, allows you to unlock finance by selling specific unpaid invoices at a discount to a lender in return for a cash advance. You’re not handing your entire sales ledger over to a lender, as you would be with normal factoring or invoice discounting.

This can be useful if you take large orders from one customer, but your other invoices are smaller or irregular. By using selective invoice finance you can get advances for your large invoices, leaving the smaller ones unaffected. 

As with normal factoring, spot factoring is ‘disclosed’ – after all they will be paying back your factoring provider, not you.

You hand over credit control for the specific invoices you’ve chosen to finance to your finance provider. If you’d rather keep it in-house then you could consider selective invoice discounting. There other also other types of confidential invoice finance.

As with all types of invoice financing, your cash advance is a percentage of each invoice’s value. Once your customer has paid an invoice, the lender pays you the remaining balance minus their fee.

With spot factoring and selective invoice discounting, the individual invoices you choose to finance don’t have to be from the same customer – you decide which ones you finance and which ones you choose to handle yourself.

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