Factoring has been practiced for centuries. The Romans sold promissory notes at a discount as did the Phoenicians. The word factor comes from Latin, the language of Rome. It means to do or to make. The Pilgrims journeys to America were financed by advances from a Factor who provided the funds to pay for the journey. The Pilgrims repaid the money with earnings from America. Factoring to this day is an extremely common business practice in Europe whereas many American business men have never heard of it.
Factoring is the selling of your accounts receivable for cash versus waiting 30-60 or 90 days to be paid by your customer. When you provide a Factoring company with copies of your invoices, the Factoring Company uses your invoices to make a loan to your company. It is a simple process and can be automated after the first transaction. Credit is not an issue when providing Accounts Receivable Loans or Financing. The Financial Companies looks at the credit history of the vendor not yours! This is exceptional good for small to medium size business that have been in business for less then two years.
My first experience with Factoring came when one of my Tax clients...
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