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Whether you are simply going through a rough period, or are attempting to expand your business, invoice factoring is a unique and effective way for a company to increase their cash flow. This unique financing method has been around for thousands of years and has proven its effectiveness throughout time.
It is often said that cash is king and in todays tough economic climate, this may ring true for your company. Whether you are simply going through a rough period, or are attempting to expand your business, accounts receivable factoring is a creative and effective way for a company to increase their cash flow. This unique financing method has been around for thousands of years Accounts receivable factoring, or invoice factoring, involves selling your account receivables (invoices) to a third party (the factor) at discount. The factor is then responsible for collecting on the invoice. This provides you the upfront cash you need, while providing the additional benefit of relieving you of the responsibility of collecting on the debt. There is evidence that factoring of some type has been around for thousands of years. The Mesopotamians were the first to establish business structure and commerce law laying the roots for factoring. Evidence suggests that the ancient Romans sold promissory notes at a discount, and in the Middle ages, merchants began to advance money on the promise of deliverables (crops, etc). Factoring became more popular during the time of early American settlers. Because it took so long for goods to arrive (primarily tobacco and cotton), merchants in England would advance the money owed. They could then collect a percentage on the eventual sale and/or collection. There were also factoring companies in America who worked the other way around, allowing for the significant growth of American industry. In the 1940s and early 1950s, freight factoring supported the rapid growth of the textile and transportation industries. Factoring evolved such that goods were no longer collected in the transaction. Factoring companies could purchase the accounts receivables at a discount, and then collect on the debt in full. A large number of big factoring companies grew from this, mostly on the east coast. In the early 1950s, invoice factoring popularity expanded to small businesses rather than just large companies. The industry got more competitive and in the 1970s there were multiple mergers bringing the number of factoring companies down significantly. Beginning in the 1980s ,many banks began to offer accounts receivable factoring and again, the use of this type of financing trended back towards large companies. In the last decade or so, a number of smaller, specialized accounts receivable factoring companies have formed, offering a wider range of services customized to each business. Because of this, accounts receivable factoring is again gaining popularity with small businesses. Additionally, the current economic climate is now pushing companies to be creative in their financing. These days, a number of quality factoring companies exist to serve a variety of businesses. For example, there are companies that only do medical factoring or construction factoring. Bay View funding, based in California, still caters to the transportation industry with their freight factoring services. No matter your business, there is a company that will tailor its services your needs. Accounts receivable factoring may be ideal for your company, no matter what stage of your business cycle. You may need to increase your cash flow to help fund expansion, or just to help out in a pinch. Either way, factoring is a creative financing method that is just as effective today as it was hundreds, or even thousands of years ago.
Helen Walker. The leading http://www.bayviewfunding.com">accounts receivable factoring company since 1985,Bay View Funding has been helping businesses solve their cash flow problems.