Business Finance Expert Series: "The History of Factoring"
In conventional times factoring (
http://www.hjventures.com/factoring/factoring-glossary.html
) is one of the most sought- after method to improve the cash flow (
http://www.hjventures.com/factoring/cash-flow.html ) of a company.
When a firm decides to its account receivables to a financial
institution then it is termed as factoring. The factor then bears
the credit risk for the accounts and finally receives the sum from
the customers. It is among one of the most effective and efficient
form of financing used these days. Factoring has been in existence
since the beginning of trade and commerce. It can be traced back to
the period of a Mesopotamian king Hammurabi. However, an extensive
use of the concept began in American colonies before the revolution
started. During those times raw materials like timber, fur and
cotton were shipped from the colonies and before they reached the
destination merchant bankers in London and other parts of Europe
used to advance funds for the raw material. The practice was very
beneficial to the colonists, as they didn't have to wait for the
money to begin their harvesting again. Basic work of factors of
colonial times is similar to factors of conventional times. They
have the same job of making advances against the account receivables
( http://www.hjventures.com/factoring/accounts-receivable-financing
.html ) in order to help them in continuing with their job even
before they are paid for their sale. With the Industrial
Revolution the concept of factoring got narrowed down to credit.
In the 60's and 70's with an escalation of interest rates there
was a surge in private factors. The trend strengthened in 80's
with further increase in interest rates and changes in the
banking industry. With various expenses and inflexible rules
involved with banking, factoring is a safe and easy method for
financial expansion and growth. Working capital arranged through
factoring is an easy means to cover purchasing, operating and
other pay roll costs and provides the much-needed freedom from
varied book keeping functions like credits and collections. All
these attributes have made 'factoring' a buzzword in the
financing market. Learn more about
http://www.hjventures.com/factoring/factoring-glossary.html
About the author:
Howard Schwartz is a partner in several business strategy
groups, including HJ Ventures International, Inc. Howard has
worked with hundreds of entrepreneurs worldwide with a focus on
writing Business Plans for companies interested in raising
capital from Venture Funds and Angel Investors. Howard's
business plans have secured several million dollars in funding.
For more information:
http://www.hjventures.com/factoring/factoring-glossary.html
