Factoring is the selling of invoices at a discount and is based on business to business or business to government transactions. It is used as a financing solution to increase cash flow and help you take on more and larger projects. Factoring is used extensively by large companies for their financing. Many larger banks and financial institutions offer this service for these companies. Smaller factoring companies, like Infusion Funding, serve the small business community.
Your company has come a long way since its inception. The concern for working capital was never an issue, but recently the rapid growth or seasonal changes are beginning to catch up. Owning a successful business has brought on a whole new list of concerns when it comes to cash flow.
Here are some of the reasons businesses use factoring:
- “My staff needs to be paid in 2 weeks but I get paid in 30 days.”
- “Our expenses and income have increased, but now we’re paid in 60 days.”
- “The bank is not interested in my company, they said I was too new and too small.”
- “My personal credit isn’t great but our customers always pay.”
- “I don’t have the time to find investors or sell equity in my company.”
We’ve seen companies in almost every industry and of every size that use factoring. Companies that are new, have credit issues, or have varying month to month cash flow needs can easily find a factor that suits their needs.
Here’s a list of some of the types of companies we’ve worked with:
- Security Guard Services
- IT Staffing
- Pest Remediation
- Janitorial and Grounds Maintenance
- Administrative Staffing
- Long Haul Transportation
These are just a few of the diverse list of companies we’ve worked with. For more general information about the industries we service, check out our Industries Served page.
When Did Factoring Start?
Factoring has a long history dating back to 1800 BC in Babylon. Clay tablets created during the rule of King Hammurabi show transactions between two parties indication a future transaction of goods. These agreements also contained the future payments of goods and were used by the “bankers” of the time as proof that would allow an advance of cash. This system would lay the foundation to later be used by many European civilizations and would later be used by early American colonists, who would ship goods back to Europe and would use a factor to advance payment while the return ships brought payment. Over the past couple decades, banks have had a factoring stronghold only catering to large business and corporations. With the increased need for financing for small businesses, more and more small business factors have come in the fill those gaps.
Factoring has a long history that has benefited numerous businesses, large and small. It has become a widespread financial tool used by a large range of businesses, ranging from small hundred dollar transactions to hundreds of millions with a factoring company available for any size.