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Local Business  » Business Finance Expert Series: "The History of Factoring"

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

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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