Using Spot Factoring to Help a Small Business Succeed

Large businesses often have access to financial resources and tools which smaller companies do not. While this can seem unfair, at times, it is also an inevitable fact of life to which small business owners generally have to become accustomed. On the other hand, there are cases where a small company might be able to make use, perhaps in modified form, of a service or other form of financial assistance that might not always be widely recognized or known.

For instance, whereas many large companies regularly make use of factoring arrangements that involve relatively long-term arrangements with their financial partners, a version of the service known as spot factoring is now widely available to many much smaller ones. Recognizing and understanding how best to make use of such opportunities often proves to be an important way of making a small company even more competitive.

As details at this site show, spot factoring is a take on the well-understood service that quite regularly ends up being very well suited to the needs of smaller companies. While most small businesses are run with a close eye on costs and margins, there will be times when having immediate access to cash will justify giving up something of the potential value of an invoice or certain accounts receivable. While a small business owner might not be able to justify entering into one of the common factoring arrangements whereby a factor will take over the right to collect on every invoice sent to particular clients, being able to quickly convert an occasional one on demand can certainly be valuable.

Compared to the more involved and longer lasting factoring arrangements to which larger companies are sometimes attracted, of course, the spot-based style of financing will involve some costs of its own. For one thing, the rates and fees charged for the service itself will tend to be somewhat higher, as factors will be exposed to more risk and have less of an ability to combine their collection efforts across a number of invoices. Even so, however, many small business owners find that being able to turn one or a couple of invoices into cash on demand and when needed turns out to be an extremely powerful and valuable tool.