The History of Factoring
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Fact-checked by: Bruce Sayer
Since Mesopotamian times, savvy merchants were trying to find ways to acquire the funds they needed to continue producing their goods. Fast forward about 2400+ years, and their idea is still going strong in the way of factoring.
Factoring is a financial practice that many companies use to gain access to their working capital. Businesses sell their invoices to a factor at a discount, allowing them to get a large percentage of the invoice amount within a day.
Though this great form of increasing a company’s cash flow seems to be rather unknown to some, it has actually been around for quite a while. It is said that factoring got its start in the Mesopotamian times, though didn’t become a common financial practice until just prior to the 1400s in England. When the pilgrims brought factoring with them to America, the practice really caught on as they sold raw materials to British and European merchants. Since it took so long for goods and payments to travel across the Atlantic Ocean, merchants looked to factoring to gather the means to process new orders and continue selling.
Factoring evolved over centuries, changing with the organization of companies, new emerging technologies, and development of common law framework. The modern model of factoring started to take shape during the Industrial revolution, when a customer’s credit started to become a focus.
Just prior to the 1930s, factoring boomed in the textile and garment industries, where factoring was used to help purchase raw materials to continuously produce goods without interruption.
Today, factoring continues to be a great option for alternative financing. The popularity has expanded into several industries. Businesses of many types are finding factoring to be a great way to improve their cash flow and keep their business going.
Want to learn more about factoring and how it can help your business? Feel free to contact us!
ABOUT eCapital
Since 2006, eCapital has been on a mission to change the way small to medium sized businesses access the funding they need to reach their goals. We know that to survive and thrive, businesses need financial flexibility to quickly respond to challenges and take advantage of opportunities, all in real time. Companies today need innovation guided by experience to unlock the potential of their assets to give better, faster access to the capital they require.
We’ve answered the call and have built a team of over 600 experts in asset evaluation, batch processing, customer support and fintech solutions. Together, we have created a funding model that features rapid approvals and processing, 24/7 access to funds and the freedom to use the money wherever and whenever it’s needed. This is the future of business funding, and it’s available today, at eCapital.
eCapital Corp
eCapital Corp. is committed to supporting small and middle-market companies in the United States, Canada, and the UK by accelerating their access to capital through financial solutions like invoice factoring, factoring lines of credit, asset-based lending and equipment refinancing. Headquartered in Miami, Florida, eCapital is an innovative leader in providing flexible, customized cash flow to businesses. For more information about eCapital, visit eCapital.com.