Factoring History

Welcome to factoring. Whether you own a business, looking to building one or looking for new financial tools for your current employer, factoring can help you reach your financial goals.

Factoring has the ironic distinction of many of the most successful businesess. Why ironic? Because factoring is not taught in many business colleges. Yet it is a financial process that frees up billions of dollars every year, enabling millions of businesess to grow and prosper.

Factoring is the business of purchasing commercial accounts receivable (invoices) froma 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.

The terms can squeeze the life (and cash is the lifeblood of any business) out of a new or struggling new company.

Factoring has a long and rich tradition, dating back 4,0000 years to the days of Hammurabi. Hammunrabi was the king of Mesopotemia, which gets

credit for 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 concpt of factoring.

After a while Hammurabi and the Mesopotamians went the way of extinct civilizations, but factoring endured. Almost every civilization that valued commerrce has practised some sort of factoring, including the Romans who were the first to sell promissory note at a discount.

The wide spread, documented use of factoring occured 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 Euopean customers.

Recognize that these were not banking relationships as they exits today. If the colonists had been forced to use modern banking services in18th 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 receivables 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, factoring became more focus on the issue of credit. Although the basic premise remains the same, by assisting clients in determining the creditworthyness of their customers and setting credit limits, factors could guarantee payment of their approved customers.

This known as factoring without recourse (or non recourse factoring) and is quite common in business today.

Prior to the 1930´s, factoring occured in the textile and garment industries as the industries were the direct descents 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.

Today, factors exists in all different shapes and sizes: As a division of a big financial institution or, in larger numbers, as an individually owned and operated entrepenuerial endevours.

This year alone millions of businesses will sell billions of Euros and other currency in account receivables, and they are doing it for profit growth, and in some cases, their very survival.

We are in the unique position of representing factors that serve every industry. And because of our unique position we can solve your cash flow needs quickly and efficiently.

Almost every civilization that has practised commerrce has practised some form of financing. As more banks stop befriending the small business person, factoring is becoming an increasing popular option.

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