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What is Single Invoice Finance (Spot Factoring)?

Single invoice finance is a type of factoring that allows companies to finance an individual invoice, rather than having to finance the whole accounts receivable ledger. It is used by companies that have to offer net-30 to net-60 days terms to clients but can’t afford to wait for payment.

This solution has been gaining popularity across Australia as a flexible way to finance small businesses that need working capital. Single invoice finance is also known in the industry as ‘single invoice factoring’ and as ‘spot factoring’.

Do you have invoices that are due in 30 to 60 days?

One of the challenges of working with large commercial clients is that they often demand payment terms as a condition of working with your company. If you want to win the order, you must offer payment terms. This demand is usually not negotiable.

Offering net-30 terms can leave your company at a financial disadvantage. You have to spend money to deliver the product/service and then wait one to two months for payment. This delay can create a problem if you don’t have enough cash reserves to manage business expenses while you wait for payment. Unfortunately, these cash flow problems usually worsen if the payment you are waiting for happens to be a large one.

The solution? Finance your invoice

A simple way to solve these cash flow problems is to finance your invoices. This solution provides you with the funds you need to pay important expenses, such as wages and suppliers. You can also use the funds strategically to pursue new opportunities.

This type of financing does not require that you finance your whole accounts receivable ledger. It allows you to finance a single invoice. It’s flexible, so you can use it as often as you need it.

How does spot factoring work?

The factoring transaction is structured as the sale of an asset (the invoice) to the factoring company, using two payments. Transactions usually flow as follows:

  1. The factoring company checks the commercial credit of your customer
  2. You raise the invoice with your customer
  3. The financing terms are agreed to
  4. The invoice is verified with your customer
  5. The factoring company sends you the first payment for 80% of your invoice
  6. Once your client pays, the factor remits the remaining 20% payment (less the finance fee)

Do you qualify?

Qualifying for this type of financing is easier than qualifying for conventional products, such as overdrafts or business loans. Your company must:

  1. Sell goods or services to creditworthy commercial customers
  2. Have invoices payable in 30 to 60 days
  3. Have accounts receivable that are not currently pledged as security

Advantages

Using a facility that allows you to finance a single invoice, or a small group of them, has advantages over other solutions. Single invoice finance:

  1. Offers flexible financing. Use it only when you need it
  2. Is available to small business with limited trade history
  3. Enables you to take on large clients/projects
  4. Enables you to offer net 30 to 60 day terms
  5. Does not require that you pledge your home as security

For more information, learn more about the advantages and drawbacks of single invoice factoring.

Can we help you?

We are a leading factoring company and can provide high advances at competitive rates. For more information, fill out our enquiry form and a representative will contact you soon.