It is believed that factoring originated in Mesopotamia over 4000 years ago.  During the Roman Empire, it adapted as promissory paper was sold at a discount.

In more recent history, it was the American Colonies prior to the Revolution that used factoring to keep the textile, garment, and timber industries producing while business partners in England waited for the arrival of shipments of American goods from across the Atlantic. 

Factoring has really emerged as a more common means of funding since the 1980s.  Many different industries are now recognizing the benefits that the textile and garment industries have enjoyed since Colonial times.

Factoring for Competitive Advantage

The funding of receivables or invoices, known as factoring, has become a common type of transaction over the past 25 years.  The problem is clear, your company invoices other businesses for goods or services, which often chokes your cash flow while waiting for payment of the invoice.  That wait can be 30, 60, 90 days before the payment arrives.  In the meantime, the your company has orders to fulfill, payroll to meet, bills to pay, inventory to buy, or growth opportunities to take advantage of...but no accessible funds.

Invoices are essentially promissory paper which is a commodity in the cash flow industry.  They can be sold to a funding source so that the your company can take advantage of immediate cash.  This kind of advantage in any B2B transaction, in virtually any industry, can be profound.  Consider some of these benefits for your business:

• Competitive Advantage - Having usable, readily accessible cash to take advantage of growth opportunities gives you an edge over your competition.
• Order Fulfillment and Inventory - Factoring provides the funding to fill orders or stock inventory now rather than 60 or 90 days down the road.
• Avoid Incurring New Debt - Consider how much more stable your business can be if additional debt can be avoided.  Debt always carries with it finance charges, and re-payment terms that are rigid and unforgiving.  Now consider this, should the time come that a bank loan is the answer, a strong healthy cash flow may be very attractive to a potential lender.
• Flexibility - Another benefit to factoring is the sheer flexibility of it.  Sell some or all of your invoices...only when you need to, or as part of your business strategy.
• Survival - During lean times, the sale of your invoices can be your lifeline to paying taxes, debts, and meeting payroll.  Have peace of mind in knowing that you have options to keep your business afloat.
• Quick and Convenient - Gain maximum efficiency, selling invoices is a fast and convenient process.  No waiting for invoice payments or loan approval processes.

The Principles of Factoring

The principle is simple, a Certified Cash Flow Consultant (CCFC) helps you secure the capital you need from a suitable funding source. The funding source will make an offer to purchase the invoice(s) at a discount of the full face value.  The discount is determined by many factors including the credit worthiness of the business who owes on the note, the age of the note, and the expected rate of return for the funding source.  In essence, the funding source is investing in the invoice.

Now why would you want to get paid less for the invoice, when all you need to do is wait out the term and get the full payment?  The answer is that the discount is less expensive than waiting for the maturity of the term of the invoice.  Consider these points:

• Payment Discount - Typically, businesses will offer a discount to business customers that pay on-time.  Usually, the discount experienced on the invoice sale, is less than what you may offer on your own for on-time payment.
• Time is Money - Time spent waiting to get paid is profit slipping through your company's fingers.  It is common for business customers to delay payment for the precise reason your company would benefit by not waiting.  Money in hand now, is more valuable that money later.  You customer businesses often strategically put off making payments to you so the funds can be used to grow their business.  They may be taking advantage of interest they may be earning on it, and generally keeping their own cash flow from impact as long as possible.  In essence, your company becomes a facilitator in the strategic objectives of your business customer.  When you factor, the facilitator becomes the funding source, and both your business and your customer's business benefit.
• Competitive Advantage - The potential of increasing profit typically outweighs the discounted sale of the invoice.  This gives you the same competitive advantage that many large companies have enjoyed for years.

That's how at CapSource Funding, factoring can help you "turn promises into profits".

FREE CONFIDENTIAL Analysis

If you are intrigued by the prospect of what an improved cash flow can do for your business, then submit an Information Form to CapSource Funding for review.  Learn how you can turn your promissory paper into profit.  Your request will be analyzed by a Certified Cash Flow Consultant (CCFC)*.  There is no obligation, and the process is quick, easy, and confidential.

* Find out how to obtain a FREE analysis...