How to Select the Best Invoice Factoring Finance Company for
your Business
What is factoring?
Factoring is an innovative method of business financing that
allows clients to get an accelerated payment on their slow
paying invoices. Traditionally, when a company offers its
services to another business, they need to wait between thirty
to sixty days to get paid. Although companies that have a large
cash cushion in the bank can absorb the cost of waiting to be
paid, small and medium sized businesses cannot. This can
jeopardize a company's ability to meet existing payment
obligations, or worse, prevent it from capitalizing on new
opportunities.
This is where factoring can be a very helpful tool. A factor can
provide a company with an advance payment on its accounts
receivable. The factor then waits to be paid by the clients'
customers, while the client gets use of the funds immediately.
The transaction is structured as the sale of a financial right,
rather than as a loan. Because of this, the factor focuses more
on the strength of the customer paying the receivable rather
than on the financial strength of the client. This makes
factoring the ideal financial tool for new, small and emerging
businesses.
Keys features when looking for a factor
Selecting the right factor for your company can be a very
complex task. Given the importance of the factoring relationship
to your company's ability to succeed and grow, it is critical
that you do the proper due diligence when selecting a factoring
partner. Here is a list of some of the criteria that are
important when selecting a factoring financing company: