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| Spot Factoring |  There is a surefire way to turn your receivables into cash. This is spot factoring. That fact that you wait 30 days or more for invoices to be paid is normal. Factors can pay you the bulk of what's owed within a couple of days. They look for your customers' credit. So, all you'll receive is the balance, less administrative expenses and fees, after the customer pays. Spot factors operate differently. But the most want companies to sign contracts promising them a certain amount of business over time. They'll buy a receivable whenever a business needs to sell one.
What spot factors do is investing a lot of time up front. They have to check whether customers can really pay. As there is the financial risk essential in what they do, these factors must do that. Having checked that, spot factors do intensive inquiries into the transaction itself. They corroborate that the goods were received or the service fulfilled, that the customer got what was ordered and that the quality was acceptable, and also that the customer intends to pay the invoice.
Besides, spot factors advance 60% to 80% of the value of an invoice within a couple of days of a commitment. Such players as Access Capital, in New York City, price their services in 10-day increments. But the other use 15-day periods. Expect to pay anywhere from 4% to 7% of the value of the invoice in fees, supposing an invoice is paid in 30 days.
You can see that this can be a pricey way to finance a business. And whether it worth depends on your other options and how thick your margins are. You're off waiting for checks, in case you are not going to make money on the cash you get.
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