Although big businesses have been using factoring businesses for years, small business factoring is relatively new. There are many companies offering factoring services that now cater to small- and medium-sized businesses. Therefore small businesses need to learn all they can about business factoring companies’ basics so they are prepared to find the right factoring company for all their factoring needs.

On the other side of the coin, brokers need to be prepared to counsel businesses, so they need to understand business factoring companies basics too. There are US factoring companies that have training set up for brokers and businesses to help them understand factoring concepts.

When considering leaning about business factoring companies, rather than just consulting an invoice factoring directory, take into account the following:

1. Find learning centers on the Internet and read about the factoring business.

2. Select training that will prepare brokers for business financial factoring.

3. Use factoring software to better understand invoice factoring companies’ basics.

Action Steps
The best contacts and resources to help you get it done

Take the time to read the information US factoring companies provide

There are many national factoring companies who provide information on what is factoring and how it works, as well as information on fees and advances. Reading the information they furnish in their learning centers can help you make sense of factoring basics and give you a head start on understanding business factoring companies.

I recommend: Invoice Factoring Group and its Commercial Capital subsidiary offer information and articles on factoring. It gives you information on the different types of factoring, such as transportation and construction factoring, as well as information on factoring itself. Crestmark Capital has a learning center that covers factoring basics as well as the benefits of factoring and the factoring process. Universal Funding explains invoice factoring and its benefits for your business.

Find factoring business training for brokers

Factoring has grown into a billion dollar business in recent times, so brokers need to prepare for it, if they want to compete in this business. Training will prepare you to learn the basic concepts for business factoring companies as well as give you more insight into the methods of factoring.

I recommend: FactorHelp has two different programs that can help you succeed in an accounts receivable factoring company. It offers regular classes and specialized classes that the client can select themselves. Rexford Funding has Webinar training for brokers or you can purchase training programs from the company in order to increase your chances in the factoring business. United States Factoring Brokers Association offers training programs to anyone who has a website. You can choose from a full course training program or a re-training program.

Understand how small business factoring software can help you as a client or a broker

Although spreadsheets are great, when building a big business you need a better system to track accounts and clients. Factoring software also allows you to let your clients check their accounts. Software will also help you understand business factoring companies' basics.

I recommend: FactorFox is a factoring software that saves you time and gives your clients access to their accounts any time. It offers demos that will explain how to use the software and a 30-day free trial. FactorSoft, from Bayside Business Solutions, handles all your factoring needs and is affordable. No matter what size your business is, Factor/SQL-- from Distinctive Solutions -- can assist you in all your factoring businesses. Its sidekick eFactor allows your clients to check their accounts whenever they want.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Make sure you have anti-virus protection when using online resources and downloading software in order to learn more about factoring companies.

In any small business, there comes a moment when thing are going great — orders pour in, production is humming, everyone is working overtime to meet deadlines — and cash gets tight. A pile of invoices is great, but it means money in 90 days at best.

Small business factoring companies fill the gap, buying invoices at discount for ready cash now. Also known as accounts receivable financing, this form of non-debt, non-equity financing can get your growing business over a hump, if used wisely and within reason.

Accounts receivable factoring is a competitive, tough business with plenty of providers seeking to meet your company's needs. In this guide to small business factoring, you'll learn:

1. Types of small business factoring companies.
2. Avoiding common small business factoring risks.
3. Business factoring companies and international trade.
4. Specialized accounts receivable factoring companies for trucking.

Action Steps
The best contacts and resources to help you get it done

Choose from types of small business factoring companies

How much you pay for small business factoring, as well as how much your customers know about your business factoring strategy, is up to you. Full-service business factoring companies will be calling your customer for collections, while a confidential accounts receivable factoring company will simply work with your accounting department, collecting in your name but leaving credit decisions to you.

I recommend: Take a look at full-service, or notified, invoice factoring companies including Vital Force Factoring and New Century Financial. Some confidential business factoring companies include Inzap, and BTB Capital, and Bibby Financial Services. Find more invoice factoring companies in the directory at Business.com.

Keep track of your risk using small business factoring companies

The cost of small business factoring means it is often financing of last resort for most. Some key concepts include recourse and non-recourse business factoring. With recourse business factoring, uncollected invoices are returned in 90 days. Non-recourse financing is more expensive, since the factoring company must eat any losses on invoices they don't collect after 90 days.

I recommend: A good way to hedge your risk is to work with a large financial institution when buying factoring company services. Consider small business factoring from CIT, Wells Fargo, GE Capital or UPS.

Finding business factoring for international trade

Doing more international business means invoices from foreign buyers. It can be hard to collect in reasonable time frames, and language and legal issues can be a problem, too, when doing international business. Invoice factoring companies can make the difference here.

I recommend: Doing all your business in Brazil, or Beijing? Find a local partner through Factors Chain International.

Seek small business factoring designed for your business

Although most business owners rely on small business factoring companies for financing in a pinch, there are industries that subsist on accounts receivable factoring companies and their form of short-term financing. Others concentrate on manufacturing business factoring.

I recommend: The freight business, for instance, relies heavily on small business factoring, from invoice factoring companies like Apex Capital, Trancentral and Factor Loads.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Choosing a small business factoring company can be complex. Review contracts carefully and comparison shop terms.
• •  While invoice factoring can make accounting and collection work disappear, it also reduces contact with your customers.
• •  As your business grows, seek alternative financing before becoming reliant on accounts receivable factoring financing.

Your accounts receivable are a valuable part of your business; you can sell them to factoring businesses who will give you a percentage of the total up front and the balance — minus a fee — after they receive the money from the customer. There isn’t any waiting to get the payment from your customer and no need to seek a loan. Best of all, if you’re a new business, your customer’s credit is the basis, instead of yours.

Working with business factoring companies means understanding the advance you’ll receive, the fees involved and the final amount you’ll get. You also need to select invoice factoring companies that’ll let you choose which invoices you want to factor and the length of time you’re committed to factoring them.

You can try to locate an invoice factoring directory, which will help you make these decisions, or consider the following when working with business factoring companies:

1. Select a factoring company that will pay you the largest percentage of your accounts.

2. Find an accounts receivable factoring company that has a low fee.

3. Choose a small business factoring company that specializes in buying invoices from small businesses.

4. Check out national factoring companies that guarantee 24-hour financing.

Action Steps
The best contacts and resources to help you get it done

Locate a factoring business that gives you the most up-front money

Companies offering factoring services advance you anywhere from 65% to 97% of your receivables. When you are working with business factoring companies, be sure the company is offering an advance up to at least 90%. This will give you more up front money for whatever you need.

I recommend: Olympic Credit Fund, established in 1991, offers up to 97% advanced rates. Fostrian Business Capital provides working capital to emerging businesses unable to arrange bank financing. It offers up to 90% advanced rates. Commercial Finance Group caters to businesses that don’t qualify for bank financing and gives advances up to 90%.

Choose a business financial factoring company that charges a low factoring fee

US factoring companies have fees as low as 1% and as high 5% of your receivables. Select a factoring company that charges 2% or less in order to find the best prices for your factoring needs.

I recommend: If you are a small or mid-size business, try Commercial Capital. Your advance may be as high as 90% and your rate could be as low as 1.5%. Inzap, founded in 1999, advances the full amount of receivables minus their fee, which is usually 2%. It caters to small businesses. Advanced Commercial Capital specializes in 24-hour funding and offers low fees and high advances.

Find an accounts receivable factoring company that caters to small businesses

Factoring companies that specialize in factoring to small businesses are more likely to give you more personalized service, better rates and higher advances. Find the one that will service all your needs.

I recommend: Rexford Funding's account executives have offered small businesses factoring for more than 30 years. Farrago Capital caters to small businesses and has more than 20 years combined experience in factoring. 1st Trust Factoring specializes in small business factoring and offers up to 90% advanced rates.

Select a factoring company that guarantees a speedy turnaround time

Some factoring businesses assure you of a fast turnaround time. Find one that offers this service to see if it meets your other requirements as well.

I recommend: Riviera Finance is a nationwide company that guarantees 24-hour funding. It’s been in business for almost 40 years. New Century Financial, founded in 1985, caters to small and medium businesses and guarantees 24-hour funding. Porter Capital specializes in providing working capital overnight. It’s been in business since 1991.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  When working with business factoring companies, you need to understand whether the accounts receivable factoring company you picked uses recourse or non-recourse. Recourse means that the factoring company can sell the invoice back to you if no one pays it within a certain amount of time. With non-recourse, the factoring company absorbs the loss.

Because adequate cash flow is a constant concern, businesses consider factoring when they are not sure that they can meet payroll and operating expenses at given times. Service and retail industries that rely on fast billing reversals frequently turn to business factoring companies that offer a variety of funding solutions. The availability of funding usually depends on market forecasts and your own company's financial well-being. Learning some key terms related to business factoring companies can help you negotiate these solutions.

Action Steps
The best contacts and resources to help you get it done

Factoring

Factoring refers to selling accounts receivable to a factoring company in exchange for the cash value today. The cost for receiving the money today can be steep.

I recommend: The Invoice Factoring Group spells out how factoring helps you pay invoices due later in the month. It also explains how your business benefits from advance invoice factoring.

Lines of credit

When business factoring companies speak about lines of credit, they are referring to a company's profitability and financial leverage.

I recommend: At Factor Help, find out how your company's lines of credit can translate into locating the best lenders. You'll also discover if you qualify for a prime rate loan.

Factoring loans

Factoring loans provide extra funding in situations where you anticipate that your cash flow may be temporarily restricted.

I recommend: Resource Nation helps you compare the two basic kinds of factoring loans available. Decide between recourse and non-recourse factoring loans, depending on whether you are able to pay the funds not collected by the factoring company.

Accounts receivable factoring

Companies engage in accounts receivable factoring when they are in immediate need of cash flow. In order to secure these funds, companies sell their accounts receivables.

I recommend: Business Finance not only explains how accounts receivable factoring works, it also lists some compelling reasons to enter into this kind of factoring arrangement.

Non recourse factoring

Companies that engage in non recourse factoring are aware that the factoring company may have insufficient funds to cover costs in the event a client is unable to pay.

I recommend: All Options presents the pros and cons of the riskier non recourse factoring method. Find out why this more expensive solution to factoring may be worthwhile in the long term.

Debt factoring

Debt factoring refers to the purchase amount that a company sells its accounts receivables for. When the sale is made at a discount, the process is known as debt factoring.

I recommend: Debt Factoring takes you step by step through the process of a typical discounted factoring transaction. It also explains why debt factoring is best used as a long term strategy.