Using A Factor

Where can you find a factor? Most banks don’t offer this service, but your banker can refer you to a company that does. Business colleagues may also have recommendations.
Whether you get a referral or find a factor on your own, carefully evaluate the factoring company before signing with it. Important qualifications include:
* Experience—Does the finance company have many years of experience in processing invoice advances?
* Capacity—Does the factoring company fund its invoices itself? Or does it just broker the transactions to another source?
* Technology—Does the factor have the ability to receive invoices electronically and process them rapidly, so you can have payment quickly?
If you sell to other businesses, factoring may prove to be a useful financial tool to help you take advantage of your strong sales to help your company grow. When you start to think that you could sell more if you had more working capital, that’s a good time to take advantage of factoring as a financing option.
Source: Dan Sullivan (dsullivan@textronfinancial.com) is vice president of business development for Systran Financial Services of Textron Financial Corporation, a provider of factoring and asset-based lending services to businesses in the St. Louis area.