Does your business need an injection of working capital? Unexpected bills and expenses are a common problem, but equally you might want to raise some extra capital in order to invest in growth. You might not want to sign up to a long term plan as it’s more of a short term issue – and that’s where you should investigate selective factoring. This is a flexible way to introduce cash into your business, even if you only want to use it in the short term.
Selective factoring lets you factor a single invoice as a one off, so you can receive an advance on the value of a single transaction. Unlike normal factoring, you’re not tied in to a long term programme structured around monthly payments. You can release cash tied up in a single invoice or number of invoices on a one off basis. This means you can obtain the extra cash flow your business needs without committing to long term financial arrangements.
Selective factoring generally works in the same way as traditional factoring arrangements. Your factoring lender will review the invoice, confirm your goods and services have been delivered and check out the credit-worthiness of your debtor. They can then release a percentage of the invoice’s value, which is typically up to 90% of its total value. You get your cash, and once the customer has cleared their debt, the factoring lender releases the rest of the invoice’s value, minus a small lending fee.
As it’s a one off deal, there could be more eligibility requirements when it comes to value and time frame – but still, if you’re looking for short term help with your cash flow, it’s a valuable finance tool that could be a great help. Selective factoring offers flexible, accessible finance to businesses which operate on credit terms. You’ll be under no obligation to take on more factoring services either – but many businesses do find that it’s a compatible solution for their business, starting them on the way to a helpful working relationship with their factoring lender.