According to Wikipedia factoring is a financial transaction in which a business sells its accounts receivable (also known as invoices) to a third party (in this case Porter Capital) in order to meet the company's "present and immediate cash needs." In many cases factoring is referred to as accounts receivable factoring, invoice factoring, and sometimes accounts receivable financing. Every type of financing has benefits, for the purpose of this article we will be focusing on the top benefits of factoring services, and how it can help accomplish your business goals.
When it comes to the history of this type of financial practice there are many misconceptions about factoring, although it is an extremely old form of financing. It was first used in the U.S. in the textile industry over a hundred years ago, which was an industry of small, rapidly growing businesses selling to large retail chains and clothing manufacturers. Factoring was also a common form of financing commerce in England, and some rules for factoring are even found in the Code of Hammurabi thanks to the benefits of factoring services, the first set of laws governing commerce in ancient Babylonia (seen below).
The three parties involved in nearly every single factoring arrangement are the seller, the debtor, and the factor (this is us, Porter Capital). As with all businesses there will come a time in the lifespan of your particular small business that will require an infusion of working capital quickly; this might be from the result of a new business acquisition, a large order of inventory (whether you have it on hand or need to go to production), or just a brand new business opportunity that your company wants to take advantage of - in this situation and many others like it factoring may be the perfect solution for your business and is usually part of a good business plan crafted for long-term success.
Every situation will be different, but you can sometimes get funds in exchange for your outstanding invoices within one business day and here at Porter Capital we can work with you or your financial representative to make sure that everything is handled in as timely a manner as financially possible. As small business loans or financial funding options go, invoice or accounts receivable factoring tends to be very time efficient. Traditional business loans—especially bank loans—can take several weeks to be approved. If you’re in a time-crunch and you need cash for your invoices as soon as possible, factoring might be preferable to a traditional bank loan and in many cases it can be more beneficial.
According to Prairie Business Credit the Top 10 benefits of factoring are:
Big Growth without Giving up Equity
Better Cash Flow Management
Reduce Bad Debt
Improve Credit Rating
Take Advantage of Supplier Discounts
Capture New Sales Opportunities
Slow Turning Receivables
Too New for the Bank
High Customer Concentration on Receivables
Cost Savings on Collections and Administration
Once you have come to the decision that the benefits of factoring services outweighs the other options for financing and factoring is the way to go it's time to choose a factoring company, and unfortunately there are many options to choose from and the task can be daunting. Here at Porter Capital we provide some of the best customer service in the industry and can turnaround your factoring decision in as little as 24 hours, giving your business the immediate access to cash that it needs! If you would like some more information on our factoring services all you need to do is fill out the form below, or visit www.portercap.net/apply and one of our financial specialists will be in touch soon!