Factoring can work for most companies which sell to customers on credit. Since factoring is based on lending against sales debtors, retail businesses are not suitable. It is especially well-suited to companies which are growing rapidly. Typically, fast-growing companies, even profitable ones, need a lot more working capital as they grow; factoring can provide the cash to allow companies to pay suppliers before the customers have paid them. Factoring companies need to be comfortable that an invoice sent to them by a company is genuine. Otherwise, they could end up lending large amounts of money against security which does not exist. For this reason, they like businesses where a proof of delivery is easily obtainable, such as where physical goods are delivered. Most manufacturing or distribution businesses would be eligible, therefore.
Factors have increasingly also lent to companies in service businesses, such as temporary staff agencies or even advertising agencies and publishing companies. There is no strict list of types of business which always will or always will not be appropriate, though, so if in doubt, ask.
Some factoring companies will also take a different view than others. The smaller ones may frequently be more flexible in their approach than their larger competitors, for example. If one or two factors don't think your company is suitable, don't be put off; try a few more from our directory.