Spot factoring, also called single-invoice or selective factoring, is the sale of one invoice, or a handful the seller chooses, as a one-off transaction. There is no obligation to factor future invoices.
How it works in factoring
The process mirrors standard factoring, just on a smaller scale:
- The seller picks an invoice to sell.
- The factor checks the customer's credit and verifies the invoice.
- The factor advances part of the value and collects from the customer.
- The remainder, minus the fee, is released after payment.
Because the factor underwrites the deal for a single transaction, its setup effort is spread over less volume. Spot transactions may therefore carry higher per-invoice pricing, and some factors only accept them above a minimum invoice size. The factor will typically still file a UCC financing statement or require one covering the specific invoice.
Spot factoring suits businesses with an occasional cash gap: a large order that ties up funds, a seasonal surge, or a single slow-paying customer.
What to check
- Whether the arrangement is truly single-invoice, or whether signing creates a broader lien or a later volume commitment
- The scope of any UCC filing and whether it will be terminated after the invoice is paid
- Whether recourse applies and for how long
- All-in cost compared with ongoing factoring at your expected volume
If you find yourself spot factoring frequently, an ongoing arrangement may cost less, but read its minimums and termination terms first.