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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.
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Make sure you understand the fees you will pay for this service. They typically include the cost of funds and making the collections.
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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.
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Ask your bank or CPA to recommend factors. Check their references.
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Visit www.cfa.com, the Web site of the Commercial Finance Association, and the International Factoring Association at www.factoring.org for a list of factors. The CIT Group site, www.cit.com, provides information on factoring (click on “Business Financing,” then “Commercial Finance,” to access the search feature).
5 Tips on Factoring
