What Does The Word Factoring Mean?
For a small businesses, there is another definition for factoring, other than the mathematical term. Factoring, or invoice, is also a financial service whereby a factor or a factoring company advances funds to a business in exchange for their accounts receivables. In other words, the business sells or transfers title to its accounts receivables to the factoring company, and subsequently, the seller's customers send their payment directly to the factor in 30, 60 or 90 days later.
Factoring was first used by the Mesopotamians about 4,000 years ago, and history tells us that the Romans also used a type of factoring. They sold discounted promissory notes to a secondary market. when the American colonists settled in America, they factored goods like furs and timber from the new country to European merchants who paided the colonists advances. (i.e. they factored) and this helped the cash flow for the Colonists so that they could continue their businesses.
Invoice factoring is an excellent source of cash flow, and most factors do not expect to buy 100 percent of a company's receivables, and there are no minimum or maximum sales volume requirements. "Single invoice factoring" is where small to medium-sized businesses (SMEs) can factor one or two invoices at a time every month. This form of factoring has grown increasingly popular since the economic downturn, and since it is difficult for many businesses to get loans or credit. Anyone can get the cash they need without a long applicaiton process, minimums, maximums, or a long-term commitment.
A factoring company's professional rates are competitive. Why? Because each of its client's circumstances vary, and this may have an impact on the fees. A business can often make choices of invoices to be factored, enabling them to retain most of their money, and this guarantees adequate cash flow. Invoice factoring provides a business with upfront cash quickly -- often in as little as 24 to 48 hours -- and you do not have to wait days, or worse yet months, to get approved, like it is when you apply for a loan. It only takes a couple of days to set up a factoring agreement, and then you can usually get your money by the next day.
Plus, the good news is that you can sell your invoices to the factor over and over again without having to be approved every time, so that you can get the funds faster. Factoring will improve a company's cash flow for better day to day operations. Factoring continues to be a viable alternative to traditional financing such as loans, and credit cards.
Almost any business with good clients and outstanding invoices can benefit from invoice factoring.
Factoring was first used by the Mesopotamians about 4,000 years ago, and history tells us that the Romans also used a type of factoring. They sold discounted promissory notes to a secondary market. when the American colonists settled in America, they factored goods like furs and timber from the new country to European merchants who paided the colonists advances. (i.e. they factored) and this helped the cash flow for the Colonists so that they could continue their businesses.
Invoice factoring is an excellent source of cash flow, and most factors do not expect to buy 100 percent of a company's receivables, and there are no minimum or maximum sales volume requirements. "Single invoice factoring" is where small to medium-sized businesses (SMEs) can factor one or two invoices at a time every month. This form of factoring has grown increasingly popular since the economic downturn, and since it is difficult for many businesses to get loans or credit. Anyone can get the cash they need without a long applicaiton process, minimums, maximums, or a long-term commitment.
A factoring company's professional rates are competitive. Why? Because each of its client's circumstances vary, and this may have an impact on the fees. A business can often make choices of invoices to be factored, enabling them to retain most of their money, and this guarantees adequate cash flow. Invoice factoring provides a business with upfront cash quickly -- often in as little as 24 to 48 hours -- and you do not have to wait days, or worse yet months, to get approved, like it is when you apply for a loan. It only takes a couple of days to set up a factoring agreement, and then you can usually get your money by the next day.
Plus, the good news is that you can sell your invoices to the factor over and over again without having to be approved every time, so that you can get the funds faster. Factoring will improve a company's cash flow for better day to day operations. Factoring continues to be a viable alternative to traditional financing such as loans, and credit cards.
Almost any business with good clients and outstanding invoices can benefit from invoice factoring.
