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Selective Factoring: The Basics

Do you need a quick, one time cash injection into your business? Whether you’ve been hit by an unpredictable expense or bill or if you just want to increase your potential by investing in a growth opportunity, there’s an answer that could help. Spot factoring, or selective factoring, is a flexible way to introduce quick cash into your business on a one off basis. Though invoice finance can offer longer term finance programmes with factoring and invoice discounting, spot factoring is a great short term measure for a number of circumstances.

Selective factoring allows you to factor a single invoice as a one off, letting you receive an advance on the value of a single transaction. Traditional factoring arrangements are often structured around monthly payments and recurring business, but if you want to release cash on a one off arrangement then there are factoring solutions that could help. It means you can obtain the extra cash flow your business needs without committing to long term financial arrangements.

Spot factoring works in much 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. Once this is all sorted, they can 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 transaction, there could well be a minimum invoice amount and the eligibility requirements on time frame and value might be stricter – but it’s still a worthwhile, flexible and accessible way to get hold of a one time cash injection. There’s no obligation to undertake more factoring services – but many businesses find it’s something that can help their business more in the future!


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