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• 28 Jun

  Spot Factoring Is Often Perceived As The Cheapest Option

  We have just had an interesting case which highlights a number of cases that we have seen and heard about from other parties within the industry. Spot factoring has risen in popularity recently and there have been a number of entrants to the market offering spot factoring which allows the client to determine which invoices to receive funding against in a transactional, selective way. Often these types of facilities don't have any minimum fees and we have often found a perception amongst prospects that spot factoring will be the cheapest option - in some cases, it might be.

  Cases When Spot Factoring May Be The Cheapest Option

  Spot factoring will sometimes be the best answer for a client if the client:

  • Only needs funding for a short time

  • Needs funding to cope with seasonal trading peaks

  • Needs to fund an exceptional order or a large order

  • Needs funding against a single customer, single debtor or single invoice

  • Doesn't want to be tied into a contract period or to pay any minimum fees

  • Wants to be able to terminate the arrangement at any time, without notice

  With the particular client in question, they were not using any type of invoice finance and they initially said that they wanted spot factoring as they thought that would be the cheapest option for them to raise some finance. After some discussion over time, they eventually decided to go ahead with a regular, whole turnover invoice finance facility as it gave them the stability of ongoing funding at a reasonable monthly cost.

  Related Case Study

  Also, please see this Case Study About Factoring A Single Invoice.

  Whole Turnover Versus Spot

  If you are only looking to finance the odd invoice for fixed periods of time spot factoring may well be the best option but if you want as much ongoing funding as possible regular, wholeturnover invoice finance is often a more cost-effective solution.

  Another common misperception is that "whole turnover" means that absolutely every invoice must be included - factoring companies will often agree on arrangements with clients where particular debtors are either not notified or excluded from the factoring arrangement.

  Whatever your funding needs are you should consider all the options available and compare spot factoring with wholeturnover factoring in order to see which will provide the funding in the most cost-effective way.

  By Glenn Blackman