Factoring and invoice discounting are far be it new methods of raising funds for small and medium enterprises. No, in fact they have been around for 100s of years in different forms.
Factoring originally was used in the United Kingdom way back in the 1400′s and reached America by 1620 with the arrival of the Pilgrims. Like most things factoring evolved over the years and the introduction of technology, new materials demand for products overseas has created a boom in demand for factoring.
Factoring provides a simple way to gain capital without having to use other methods of financing such as bank loans, such as using profit to fund, or using personal funding to keep business going. Small and medium businesses tend to go for factoring because it allows them to continue with their business without having to wait for the decision from a bank or use personal money to continue with business.
Bank loans as we all know have been restricted, and as well as waiting nervously for a decision from your bank manager you will be paying quite a bit of interest on the loan.
Factoring and invoice discounting use the capital you already are owed tied up in invoices to clients. So not only do you already have this amount of money, you can get your hands on it very quickly. It’s a brilliant way to gain capital very quickly, within 24 hours in fact. You don’t end up paying interest, in fact to use factoring solutions is a tiny fee, a little percentage of the money you are given by a Factoring lender.
The whole process is simple in that you continue to send out your invoices to clients and continue if you wish to chase them for payments, the difference is that you gain the capital within 24 rather than 3 months later. Pretty nifty! So although its been around for hundreds of years, Factoring and Invoice discounting still provide financing solutions for SME’s.