The Romans were the first civilization to sell promissory notes at a
discount, beginning the industry of factoring. America was built largely
on the possibilities of factoring, when colonial businesses were
factored by Europeans willing to invest cash in exchange for the promise
of large returns, and government bonds also use the same principles
applied by businesses when they engage in invoice factoring.
Invoice
factoring is, at its simplest, the sale of the right to collect cash
owed on your outstanding invoices. Most businesses engage in invoice
factoring when they need cash up front quickly, or when they have
customers that are slow to pay and don't have the resources to build an
accounts collections department. Though some companies are large and
established enough to get accounts receivable financing through a
regular bank, it can be handy to have access to invoice factoring
companies as well.
Most businesses use invoice factoring to get
fast cash. In the intense and fast paced business environment of today,
ready cash can be invaluable. With the sale of your invoice futures, you
can get the cash today you need to capture customers that will move
your business forward.
Invoice factoring is not a loan; rather,
it's an outright sale of an asset. Another way of looking at it is as a
cash advance: you give up a certain portion of the money you expect to
receive in the future in exchange for ready cash today. While some
businesses purchase invoices outright, others give you a down payment
toward the invoice, paying you the balance less their fee when they
receive payment from the customer. One of the best things about invoice
factoring is that your credit has no bearing on whether you are
approved; instead, your customer's credit qualifies the invoice for
factoring.
Many different industries take advantage of invoice factoring, including:
Other situations that might make invoice factoring a wise choice for you include:
