Small businesses may benefit from engaging in factoring their receivables. Small business factoring does have a very real cost associated with it, but also comes with some fairly significant advantages which can yield significant benefits for a company. Here are some of the considerations to have when looking into small business factoring.
What is Factoring?
A factor is a company that assumes the
collection risk associated with a receivable in exchange for a
portion of the outstanding invoices. There are many variations to the
arrangement that exists but the typical arrangement starts with some
basic due diligence on behalf of the factor.
The factor will examine the nature of the sales that the small business has and examine the history of the customers that they sell to. Typically speaking, most factors will focus on businesses that sell to other businesses, but businesses that sell in large quantities to individual …