Small Business Tips
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.
Make sure you understand the fees you will pay for this service. They typically include the cost of funds and making the collections.
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.
Ask your bank or CPA to recommend factors. Check their references.
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).