If you have heard all about the financial benefits associated with factoring and enlisting the services of factoring companies, you may be wondering who uses factoring and if your business qualifies. The good news is that most businesses that sell services or goods to other companies are eligible to factor their invoices, and to enlist the services of a factoring company if the business owner wishes. But what are the qualifying criteria? We investigate below:
Does My Business Qualify for Factoring?
Applicants for factoring services are usually evaluated on their customers’ creditworthiness, rather than their own credit score or collateral, so a short or negative credit history typically does not disqualify an applicant. Even businesses with poor credit histories can qualify for factoring if their customers’ creditworthiness is positive. This is one of the reasons why a business, especially if it is a new or struggling business, may opt to approach a factoring company rather than a bank for a loan.
It is important to note, however, that each individual factoring company may have its own unique set of criteria. Make sure you understand the expectations and services you’re getting before signing a contract.
Types of Businesses That Frequently Use Factoring
Small, medium-sized, and large companies use factoring. Many businesses in the manufacturing, trucking, staffing, wholesale and retail and oil industries work with factoring companies. Many companies that sell services or goods to governmental institutions also frequently depend on factoring programs to maintain their cash-flow.
Now that you have the answers to the questions of what invoice factoring is and how it is used as well as who uses factoring, it is time to see how a factoring company can help you maximize your cash flow. Fill out the form to speak to a representative now.