Single Invoice Funding or Spot Factoring is somewhat of a misconception when it comes to AR Factoring. There are very few people who offer the product, and there are very few borrowers who would qualify for it. Below you will find a brief education on how single invoice funding or spot factoring really works, and how you can secure the best factoring programs for your company.
What is Single Invoice Funding?
Single invoice funding is when a lender(or factor to be specific) will factor just a single invoice that you select. This type of accounts receivable funding program is ideal for people who just need a one time boost to their cash flow and are not interested in factoring all of their AR. You can expect to pay more than regular factoring rates, but in the end it can be more cost effective.
Most people think if they have an invoice they can just go and sell it and be off the hook. WRONG! First, you usually have to sign a personal guarantee. If something goes wrong and your lender cannot collect the AR, you are still on the hook. Sorry to be the bearer of bad news here.
OK, so how does Spot Factoring Really Work?
A Spot Factor should be willing to fund select accounts receivable for your business. After all, that’s why they call it single invoice funding. Right? This means that you can choose when you want to finance your AR and which accounts you want to finance. Often times the lender will require you to continue giving ALL AR from a specific debtor(customer) in the event you choose to give one. This helps cover them in the event of an offset, chargeback, or other dilutive situations in regards to the invoice.
The Spot Factoring rates can vary quite drastically for Spot Factoring. Pricing ranges depending on the size of the invoice, projected annual volume of invoices you will be funding, and the quality of the debtor. When looking to finance a single invoice your pricing can range from 1-5% of a discount off of the gross accounts receivable amount.
Ready to Apply For Spot Factoring Today?