Factoring can be a great way to improve your company’s cash flow and ensure that you have the funds you need to keep operating your company. Interestingly, factoring didn’t begin in the 20th century, it has in fact been around for thousands of years. Factoring was used back in the earliest days of civilisation, approx 4,000 years ago when the Mesopotamians used it in their business dealings.
Invoice Factoring became even more popular and acceptable when it was used in the trading of materials between the American colonists and their European buyers. Shipping the goods from the colonies was expensive and often the merchants would be waiting many months for their goods. In order to speed up the process a financial advance would be sent to the colonists in part for the materials. This then enabled the colonists to ease their cash flow and gave the ability to create a smooth process for ensuring that trade continued unabated.
In the 1930s the garment and textile industries were the most popular sectors to use invoice factoring. The purchasing of raw materials from across the world was in high demand and funding was needed to keep the factories running and meeting the high demands of their clients. Following World War II, it was evident that invoice factoring could be used for a vast range of industries. Any business that invoiced others could reap the benefits of using an outside source to look after their debtors.
Jumping forward to 2017, invoice financing is now a tried and trusted way of helping businesses keep their cash flow healthy, with the ability to help the business grow. In the UK approx 50,000 businesses regularly use invoice finance companies.