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:

·Factors’ Comfort Zone: