Get Cash for Structured Settlements and Annuities
   Call 1-503-643-9743 Home About National Funding Resource Associates Contact Us Examples of People We've Helped

Call Today
1-503-643-9743
Notice: These articles are provided "as is." National funding Resources cannot edit or change the information provided.
Get More Information

First Name:

Last Name:

Phone Number :

Email:

Enter the code as it is shown:

Your privacy is very important to us. We will not sell your information.

The History of Invoice Factoring

by David Springer

Factoring is one of the oldest business practices known. We know that it was used at least as long ago as the time of the Ancient Roman Empire, when merchants would enlist the help of collectors in order to settle trade debts. The primary reason for factorings long history is that it addresses a very fundamental problem in business itself: cash flow.

Lets say you run a small company thats developing a unique idea. Everyone works hard in designing the product, and your sales department hits pay dirt: a large manufacturing contract. This is exactly what you wanted, but you now have a problem: you need to hire more people and invest in some machinery to fulfill the contract, but you wont see any money until the goods are delivered.

In this situation, a lot of your options arent too appealing - a large loan (assuming your business has the credit,) or convincing your employees to accept a deferred payroll. In many cases the best solution is to strike a deal with an invoice factoring company. What the factoring company will do is effectively buy your invoices at a discount - the "factor," which are typically 3 - 4% - and provide you with the up front cash that you need. When they come due, the factoring company will then collect your invoices in full. Although the invoice factoring company will collect the receivables, this is usually done in a transparent way to the customer: as far as the customer is concerned, they are simply paying an invoice to a company as they normally would.

Even if its not out of a need for capital, many smaller businesses also turn to factoring companies to alleviate cash flow issues. When selling to large corporations, some businesses find themselves dealing with long gaps between invoicing and payment and with little leverage to narrow it. By turning to an invoice factoring company they can create a steadier cash flow.

The Beginnings: Invoice Factoring in Early America

Factoring made its way to America almost as soon as the pilgrims did. Many early American merchants made use of factors in order to sell tobacco and cotton abroad: they would ship their goods to England where a factor would take a percentage for selling and collecting money owed, and English merchants would do the same using American factors. In this way factoring played a pivotal role in rapid growth of American industry - without factors it would have been much more difficult for merchants to maintain a steady cash flow and trade of goods overseas.

As the American economy grew, American factors were able to concentrate more and more on domestic business. From the early colonial factors, and group of around 40 large factoring companies descended, based mostly on the east coast, that played a major role in financing the textile and transportation industries until the early 1950s. In the early part of the 20th century these factoring companies began to establish percentages of receivables that they would advance companies upon the purchasing the invoices, usually around 70%-80%. This provided much of the large amounts of capital needed in these industries.

The mid 1950s saw the emergence of smaller businesses using factoring to address cash flow issues, moving the factoring industry away from the exclusive realm of large industry. As smaller businesses began to make use of factoring, the industry grew rapidly and became more competitive. The result was a trend towards mergers beginning in the 1970s that saw the number of large factoring companies reduced to around 10 by the end of the decade. At the same time, banks and other large financial institutions began to offer factoring services, and the business of factoring became the domain of large, institutional organizations.

The Impact of Invoice Factoring on Todays Small Business Trends

The factoring industry more or less remained this way until fairly recently. The last 10 to 15 years has seen the re-emergence of small, independent factoring companies catering to a much wider range of businesses and needs. This trend has created a split market with a few mammoth factors targeting traditional factoring industries, and many small factoring companies that are continually creating new markets.

This trend towards newer, smaller invoice factoring companies is a reflection of contemporary business trends. The pace with which smaller companies develop and operate, particularly in the competitive technology and service sectors, requires a steady cash flow that cant always be provided by receivables. An example of this can be seen in the emergence of temporary staffing agencies. These companies have large payrolls and depend heavily on cash flow. The competitive nature of this industry puts many temp agencies in a position where their payroll is due before their invoices are, and many smaller factoring companies have come about to provide solutions for this gap between payables and receivables.

David Springer is a consultant for Sovereign Funding Group. Sovereign Funding Group is an experienced, reputable company that offers convenient, no-risk services to help you with the selling of your deferred payments and business financing including invoice factoring.


Need Cash?
Call now and get your free analysis.
1-503-643-9743

NFRA has many funding sources and can assist in finding the right one for you! For free analysis, call 24 hours a day at 1-503-643-9743 or Click here for the online conact form.


Featured Articles
5 MISTAKES People Make When Selling Structured Settlements for Cash Mistake 1: Agreeing to sell to the highest bidder. Unfortunately, some brokers or structured settlement/annuity sources will make a high offer just to get someone under contract. Then they will start making excuses and reduce the offer. Once you are under contract with a funding source, it is very difficult to back out. Even if you are able to pull out, you will have to start the whole process over again losing valuable time. Cash Now for Your Business Note People are interested in selling business notes for several reasons. Usually, the prospective seller has decided that he would rather receive the lump sum value of the business, rather than monthly payments. Often that's because he wants to invest in a new business. Other times, the prospective seller has an incentive such as an expensive wedding bill, college tuition or a retirement trip. Factoring Invoices - How to Get Off The Cash Flow Merry-Go-Round All businesses want to be successful and to be successful you must have sufficient cash flow. Are you tired of your unpredictable cash flow cycle? Is the ritual of making incoming cash receipts stretch to cover short-term obligations frustrating your business and making you dizzy? Cash Now for Your Real Estate Contract The private mortgage industry is a relatively young business with roots that can be traced directly to the emergence of seller-backed, or owner, financing. Prior to the very high interest rates of the late 70s and 80s, seller-backed financing was not a common financing option. The only loan option for most real estate buyers was through a bank or savings and loan institution. But with interest rates topping out at 22 percent, financing for real estate was either unavailable or too unattractive for most buyers. Real estate sales plummeted.

Other Related Articles

Innovative No Win--No Pay--No Risk Attorney Lawsuit Loan Provides Law Firms Savvy Financial Options Law firms work long and hard to achieve financial success. Today however a team of professional financial consultants have developed innovative tools to assist law firms achieve even greater financial success via a unique program called "No Win...No Pay...No Risk" Attorney Lawsuit Loans. J.G Wentworth Expands Annuity Purchase Program(TM) - Now Available in 47 States BRYN MAWR, Pa.--(BUSINESS WIRE)--Dec. 1, 2005--J.G. Wentworth today announced that it has expanded its Annuity Purchase Program(TM) to 47 states. The Annuity Purchase Program, offered through Brokerage General Agents (BGAs) and designed for use by insurance agents and brokers with their clients, allows consumers to sell all or part of their annuities to deal with changing investment strategies or personal circumstances. Note Basics 101- Selling Your Mortgage Note A basic understanding of what note investors look for when buying notes. Real Estate Options for Retirement Funds With your retirement funds it is possible to invest in real estate, mortgages, private notes, structured settlements, factoring, hard money lending, franchise, natural gas investments, golf courses, joint ventures, RV parks, fisheries investments, bonds, mutual funds, commodities and futures, marinas, stocks and limited partnerships. These are IRS-permitted investments. They have to be made within a qualified retirement account. Once stablished the account holder asks the Custodian or Facilitator to roll current retirement funds into a self-directed IRA owned LLC. This type of business transaction is legal and is penalty-free. Selling a Real Estate Note Is your Real Estate Note Saleable As a Premium real estate note buyer I am often asked by note sellers if their note is saleable. I cant stress enough to sellers how important it is to get the right information about your note and payment history to the potential note buyer. The potential buyer can only determine whether the note is what they want to buy if it meets the criteria they are looking for in a note purchase.

More Articles


HomeContact UsAbout UsExamplesArticles

© nfra.us, All Rights Reserved

National Funding Resource Associates
2850 SW Cedar Hills Blvd, #325 | OR | 97005 | USA
Phone: 503-643-9743 | Fax: 503-671-9381