5 Tips on Factoring

1. Know what the term means. It’s a way to turn your accounts receivable into cash by selling them to a finance company called a factor.

2. Make sure you understand the fees you will pay for this service. They typically include the cost of funds and making the collections.

3. Balance the cost against the gain. Factoring can be expensive but it may fuel your growth, improve cash flow, or enable you to take advantage of supplier discounts.

4. Ask your bank or CPA to recommend factors. Check their references.

5. Visit http://www.cfa.com, the Web site of the Commercial Finance Association, and the International Factoring Association at http://www.factoring.org for a list of factors. The CIT Group site, http://www.cit.com, provides information on factoring (click on “Business Financing,” then “Commercial Finance,” to access the search feature).

Brought to you by SCORE “Counselors to America’s Small Business.”


One Response to “5 Tips on Factoring”

  1. source4finance Says:

    Hi Peg,

    In the UK we have some excellent Invoice Factoring solutions that cover everything from complete outsourcing of the debtor ledger, right through to supporting 100% of the purchase value of sold goods (with 85% upfront payment of on production of the sales invoice.)

    Do you have such flexible solutions in the Americas?


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