You have one big invoice sitting at net 60, payroll due Friday, and no desire to commit your entire receivables ledger. Spot factoring lets you seek funding against an individual invoice. The agreement still controls the fees, recourse, and any continuing obligations, so compare the full terms before choosing a provider.
What spot factoring is (and isn't)
Spot factoring — also marketed as selective factoring or single-invoice factoring — is invoice factoring done one transaction at a time. You pick a specific unpaid B2B invoice, sell it to a factoring company at a discount, and receive most of the cash within days. The factor then collects payment directly from your customer.
Treat "spot factoring" as a description of how you plan to use the facility, and check the actual contract. The underlying mechanics are standard factoring. The Federal Reserve's March 2025 Consumer & Community Context describes invoice factoring as a small business selling unpaid B2B invoices to a provider at a discount; the factor collects from the invoiced customer, keeps a financing fee, and remits the remainder.
When comparing spot with whole-ledger factoring, ask for these terms in writing:
- Invoice selection. Can you choose which invoices to sell without assigning future receivables?
- Term commitment. Is there a fixed term, auto-renewal, or termination charge?
- Minimum fees. Is there a per-invoice, monthly, or annual minimum payable even if you stop using the facility?
Factoring is generally structured as a sale of accounts receivable (BDC). Ask your accountant how your specific agreement should be recorded; do not assume the marketing label determines balance-sheet treatment.
How a spot deal actually works
- You submit one invoice for goods delivered or services completed. Factors buy earned receivables only — if the work isn't done yet, that's purchase order financing territory, which covers pre-delivery costs and is a different product.
- The factor underwrites your customer, not just you. Since the customer is the payer, their credit strength and payment history drive approval and pricing. Factors set pricing after reviewing the risk profile of each transaction (BDC). Expect invoice verification, a lien search on your receivables, and identity checks — Canadian factors are FINTRAC reporting entities with mandatory compliance programs (FINTRAC).
- You get the advance. The factor wires a portion of the face value — the Advance Rate — and holds the rest as a Reserve. Advance rates vary by industry, invoice quality, and provider.
- Your customer pays the factor. Most spot deals are notification-based: the customer is instructed to remit to the factor, often via lockbox.
- You get the reserve, minus the fee. When the invoice pays, the factor releases the held balance less its discount fee.
Recourse matters even on a one-off deal. Under Recourse Factoring, if your customer doesn't pay within the agreed window (often 90 days), you buy the invoice back. Non-Recourse Factoring shifts the risk of the customer's financial inability to pay to the factor — for a higher fee, and usually excluding disputes and quality claims.
What spot factoring costs — a worked example
Factoring quotes often emphasize a discount fee rather than an annualized rate. Federal consumer-credit disclosure rules do not settle every commercial-financing disclosure question: state requirements can apply, as the CFPB's determination on state commercial-financing disclosures explains. Request the disclosures applicable to your transaction and compare actual cash flows as well as headline rates.
Here's an illustrative spot deal (fee structure is hypothetical — actual pricing varies widely by provider and risk):
| Item | Amount |
|---|---|
| Invoice face value | $50,000 |
| Advance rate | 85% → $42,500 upfront |
| Fee: 2% first 30 days + 1% each additional started 10-day period | — |
| Customer pays on day 48 | 2% + 2 × 1% = 4% |
| Total factoring fee | $2,000 |
| Reserve released | $50,000 − $42,500 − $2,000 = $5,500 |
| Total cash received | $48,000 |
A $2,000 fee to accelerate $42,500 by 48 days gives a simple annualized estimate of 35.8%: $2,000 ÷ $42,500 × 365 ÷ 48. This illustration excludes additional fees and compounding and is not a legally prescribed APR disclosure. Compare the cash-flow benefit and full cost against a business line of credit if you qualify for one.
▦Estimate your invoice factoring paymentsRun the numbers in the invoice factoring estimator →▸Use the invoice factoring calculator to compare advance, reserve, and fee assumptions.
Where spot deals get expensive: minimums. Real factoring contracts impose per-invoice minimum sizes and time-tiered fees — one SEC-filed agreement (Hipcricket, 2014) set a $5,000 minimum invoice size and a 1.25% fee on gross invoice value for the first 30 days, prorated daily after (SEC filing). If a provider charges a flat minimum fee per transaction, a $4,000 invoice can carry an effective discount several times higher than a $60,000 invoice. Spot factoring is built for large, occasional invoices — not a stream of small ones.
Concentration: the hidden constraint
Spot factoring is, by definition, concentrated: one invoice, one customer, all the risk in one place. Factors price and cap that exposure. Concentration limits are standard contract terms — one SEC-filed factoring agreement capped any single debtor at 25% of total purchased accounts outstanding, and another term sheet allowed up to 50% per account debtor (example 1, example 2). Those are historical, deal-specific figures, not current market norms — but they show why some factors won't touch a true single-customer spot deal, or will price it up, while others specialize in exactly that.
Practical implications:
- A blue-chip debtor helps enormously. An invoice to a large, creditworthy company is the easiest spot deal to place.
- A shaky or slow-paying debtor may be declined outright. The factor's repayment source is your customer.
- Repeat spot deals with the same customer may hit internal caps, pushing you toward a broader facility anyway.
Spot vs. whole-ledger: a decision table
| Situation | Better fit | Why |
|---|---|---|
| One large invoice, once or twice a year | Spot | Can fit occasional use if the agreement avoids continuing minimums |
| Factoring most invoices every month | Whole-ledger | Lower per-invoice fees usually beat spot pricing at volume |
| Testing factoring before committing | Spot | Learn the mechanics with one transaction |
| Chronic slow payers across many customers | Whole-ledger | Consistent working capital plus collections support |
| One dominant customer in the receivables ledger | Depends | Ask how concentration limits apply to the actual invoices |
| Small invoices relative to the provider's minimum fee | Compare carefully | Minimums may erode value; consider a line of credit |
Whole-ledger contracts bring their own fine print worth pricing in: one SEC-filed term sheet included an 85% advance rate, a 1.70% fee for the first 30 days plus daily fees after, a $30,000 minimum contract-year factoring fee, a 12-month term, and misdirected-payment fees (SEC filing). A $30,000 annual minimum is trivially covered if you factor $200,000 a month — and brutal if you only needed help twice.
Contract-review checklist for a spot deal
Before you sign even a one-invoice agreement, confirm:
- Total fee at your customer's realistic pay date — not the 30-day teaser tier. Model day 45, 60, and 75.
- Minimum fees — per invoice, per transaction, or a floor on the discount.
- Recourse terms — buy-back trigger date, and whether "non-recourse" excludes disputes (it usually does).
- Reserve release timing — how many days after customer payment you get the holdback.
- Notification and payment redirection — how your customer will be contacted, and misdirected-payment fees if they accidentally pay you.
- Scope of the security interest — ask whether it covers only purchased invoices or additional assets. A UCC Lien (UCC-1 Filing) covering all receivables can affect future financing even when you factor only one invoice. See our factoring agreement guide for the full clause-by-clause walkthrough.
- No hidden continuation obligations — auto-renewal or exclusivity clauses that quietly convert a spot deal into a facility.
Where EQ Funding fits
Spot factoring terms vary by provider, debtor risk, and contract structure. EQ Funding is a financing marketplace that helps businesses explore options from financing providers across the US and Canada. You can compare a spot quote against whole-ledger factoring, a line of credit, or a term loan. Providers assess the customer, invoices, and business, and approval and terms vary. Bring your invoice and expected collection date so proposals can be compared on the same assumptions.