Article: Receivables Factoring : How It All Started
Receivables Factoring
History
Welcome to factoring. Whether you own a business,
look forward
to building one or are looking for new financial
tools for your current
employer, receivables Factoring can help you reach your financial goals.
Today, factors exist in all shapes and sizes: as divisions of large financial institutions or,
inlarger numbers, as individually owned and operated entreprenurial endeavors.
Many of these private factors sprung up in record numbers as interest rates rose to new heights in the 60's and 70's.
This trend intensified in the 80's, primarily due to the increasing impact of interest rates and changes in the banking industry.
With banks becoming too expensive and too inflexible due to heavy regulation(remember the Savings and Loan crisis?),
the small businessperson was forced to find other sources of financing for expansion and growth.
As more and more banks stop befriending the small bussinesperson, factoring is becoming an increasingy popular option.
This year alone thousands of businesses will sell billions of dollars in accounts receivable,
and they are doing it for profit, growth, and in some cases , their very survival.
Factoring
has the ironic distinction of being the financial backbone of many of
America's
most successful businesess. Why ironic? Because account receivables factoring is not
taught in business
colleges, seldom mentioned in business plans and is
relatively unknown to the majority of American business people,
yet it is a
financial process that frees up billions of dollars
every year, enabling
thousands of businesses to grow and prosper.
Factoring is the
process of purchasing commercial accounts receivable(invoices) from a
business at
a discount. Business practices today dictate that in order to get
business you, as a provider
of goods and services, must extend terms to your
customers.
These terms can squeeze the life(and cash is the lifeblood of
any business) out of a new or struggling company.
Factoring has a long
and rich tradition, dating back 4,000 years to the days of Hammurabi.
Hammurabi was the king of Mesopotamia, which gets credit as the "cradle of
civilization."
In addition to many other things, the Mesopotamians first
developed writing, put structure into
business code and government regulation,
and came up with the concept of factoring.
After a while, Hammurabi and
the Mesopotamians went the way of extinct civilizations,
but factoring endured.
Almost every civilization that valued commerce has practiced some form of
factoring, including the Romans who were the first to sell actual promissory
note at a discount.
The first widespread, documented use of accounts receivable factoring
occurred in the American colonies before the revolution.
During this time,
cotton, furs and timber were shipped from the colonies. Merchant bankers in
London and
other parts of Europe advanced funds to the colonists for these raw
materials, before they reached the continent.
This enabled the colonists to
continue to harvest their new land, free from the burden of waiting to be paid
by their European customers.
Recognize that these were not banking
relationships as they exist today. If the colonists had
been forced to use
modern banking services in eighteenth century England, the process would have
been much slower. The banks would have waited to collect from the European
buyers of the raw
materials before paying the seller of these goods, the
colonists. (And at that point, who needed the bank?)
This was not practical for
anyone involved. So, just as today, the "factors" of colonial times made
advances
against the accounts receivable of clients, enabling the clients to
continue with their operations,
long before they had been paid for what they
were sold.
With the advent of the Industrial Revolution, accounts receivable factoring became
more focused on the issue of credit,
although the basic premise remained the
same. By assisting clients in determining the creditworthiness
of their
customers and setting credit limits, factors could actually guarantee payment
for approved customers.
This is known as factoring without recourse(or
non-recourse factoring)and is quite common in business today.
Prior to
the 1930's, receivables factoring in this country occurred primarily in the textile and
garment industries,
as the industries were direct descendants of the colonial
economy that used factoring so specifically.
after the war years, factors saw
the potential to bring factoring to other forms of invoice-based business and
the expansion began.
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Factoring Account Receivables Services
Contact our accounts receivable factoring specialists at: Online Invoice Facoring Request Form |
Company Information
Factoring
invoices can offer many benefits to cash-hungry companies. Payroll,
marketing efforts, and working capital are Factoring
invoices provides the means for a manufacturer to
Why Receivable Factoring Factoring is especially appealing to young and rapidly growing companies. Since the invoice factoring process shortens their business cash flow cycle, these businesses can grow faster. The ability to make more products to sell while waiting for invoices to be paid is largely eliminated. Such businesses usually net much more profit with receivables factoring than without, even when the discount is considered. Receivable Factoring Company vs. Bank Loans Factoring has been around for thousands of years. Factoring companies pay cash for the right to receive the future payments on your receivables and invoices. An unpaid accounts receivable or invoice has value. It is a debt your customer has agreed to pay in the near future. Account Receivable Factoring Frequently Asked Questions
Contact our account receivable factoring specialists at: We are currently providing account receivable factoring services nationwide including the following states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho State, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico,
New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. |
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