Not every factoring solution is the right fit for every company. Say for instance you’re a landscaper and most of your work takes place in the summer time. Would you want to sign an agreement that impacts your business year round? What if you have a staffing company with consistent monthly invoice amounts and you want a more competitive rate? Below we have explain the main differences between selective and comprehensive invoice factoring and how each can help in these situations mentioned.
Selective Invoice Factoring
With this you can choose which accounts to factor and which invoices from the chosen accounts to factor. There typically is no minimum dollar amount required and no required time frame to factor. This type of factoring works well if your business is seasonal, have short term needs for funding or if you win periodic contracts that require cash flow. In this case you may not want to make commitments because you need varying amounts of money each month and even have months when you do not need funding. Also, many firms are not comfortable turning over their entire back-office to a factoring firm as is required by comprehensive invoice factoring. The factoring rates are slightly higher than if you make time and dollar commitments but the flexibility is much greater.
Comprehensive Invoice Factoring
With this type of invoice factoring you commit all the invoices for all customers. You are required to commit to minimum monthly amounts to be factored and are required to commit to a contract for a set time frame, usually a year. In return you will receive lower factoring charges per the value of invoices factored. This type of invoice factoring works best if you have won a large extended contract or if you have an established set of customers with a predictable amount of business over a period of time.