Business Factoring - What Industries are best suited for online factoring?

Technically, factoring can work in any industry where companies are doing business with other companies.   With that being said, industries where the value of accounts receivable remains relatively constant are better for business factoring than industries where the value of an invoice can vary over time. 

A simple example of an industry with generally stable invoice values would be the information technology consulting industry.  A company bills its customer for hours worked based on a previously agreed upon contractual rate.  The vendor adds up the hours works by their people and bills the customer based on the rate.  When the invoice becomes due the customer pays its bill.  Pretty Simple. There isn't much room for disagreement. This is the type of situation, and industry that lends itself well to business factoring because the factoring company knows that if its client bills its customer $100,000 for work completed during the month, the chances are they will be paid $100,000, so the factor feels good about advancing a portion of the $100,000 to its client before the invoice is paid.

An example of an industry that can be challenging for business factoring would be health care, where the customers are large insurance companies or the US Government.  In many cases although a company bills its customer (an insurance company) for $100,000 in goods shipped or services rendered they may only collect a fraction of this amount.  Because of the variability of the invoices true value it can be difficult for factoring companies to advance money to their clients when they are not sure what the ultimate collectible amount of the invoice will be.

If when you bill your customer you feel confident that you will collect 100% of the invoice amount based on your history with this customer and operation in your industry then the changes are your industry will work well with business factoring.

To learn more about online business factoring with Fast A/R Funding click the link below.