Congratulations. You've just delivered a major order to a customer. Trouble is, until that customer pays you, you're broke. Your banker won't lend you another dime, and suppliers have cut you off until you pay them. So what do you do now?

You could cool your heels until the money comes. But before you resort to that, look into spot factoring.

Spot factoring, like ordinary factoring, is a surefire way to turn your receivables into cash. Normally, you might have to wait 30 days or more for invoices to be paid; factors, who look at your customers' credit (not yours), can pay you the bulk of what's owed within a couple of days. You'll receive the balance, less administrative costs and fees, after the customer pays. Most factors want companies to sign contracts promising them a certain amount of business over time, but spot factors operate differently. Assuming they like the credit of your customer, and the transaction itself checks out, they'll buy a receivable whenever a business needs to sell one.

Because of the financial risk inherent in what they do, spot factors invest a lot of time up front, verifying that customers indeed have the ability to pay. Once the ability to pay has been established, spot factors do intensive inquiries into the transaction itself, confirming that the goods were received or the service performed; that the customer got what was ordered and that the quality was acceptable; and that the customer intends to pay the invoice. Typically, spot factors advance 60% to 80% of the value of an invoice within a couple of days of a commitment. How much you'll see of the rest depends on how swiftly your customers pay up. Some players, such as Access Capital, in New York City, price their services in 10-day increments; others, such as Concord Growth Corp., in Palo Alto, Calif., use 15-day periods. Assuming an invoice is paid in 30 days, expect to pay anywhere from 4% to 7% of the value of the invoice in fees.

Clearly, this can be a pricey way to finance a business. Is it worth it? That depends on your other options and how thick your margins are. If you're not going to make money on the cash you get, chances are, you're better off waiting for those checks. -- Bruce G. Posner

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Onetime Lenders
Minimum Typical
Source deal advance Typical fees
Access Capital
None 70%-80% 3%-5% for 30 days

(800) 421-0034

Allstate Financial $10,000 70%-80% 4%-8% for 30 days

(703) 931-2274

Concord Growth $10,000 50%-80% 2% for 15 days

(800) 229-9000

Riviera Finance None 75%-95% 5.5% for 30 days

(800) 421-1327

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