Who Uses Factoring?

Any business that invoices customers for payment can use factoring services. It is a significant source of financing for many companies that depend on fast billing turnaround, such as hardware stores, pharmacies, dry cleaners, florists, and wine and liquor distributors. Service industries such as temp agencies, security guard services, and trucking companies also use factoring to meet payroll deadlines or simply improve cash flow as needed.

Factoring is also a valuable resource for businesses like garment companies and textile businesses that traditionally have a hard time securing loans. By factoring their accounts receivable, they can purchase raw materials or make other investments to grow their businesses.

The typical factoring candidate has $5 million to $10 million in annual sales and $25,000 to $100,000 in accounts receivable every 30 to 60 days. But most factors will work with any company meeting a monthly minimum of $5,000 to $10,000 in invoices.

Businesses with less than $5,000 in accounts receivable may find a factor willing to work with them, but are likely to have to pay more for their services. You may want to consider a small business loan or low‐interest credit card if you have less than $5,000 in monthly invoice value.

Benefits of factoring

• Simpler administration. Factoring features less paperwork than loans and no credit or reference checks of your business.