Date Added: Jan 2010
Factoring is the sale of accounts receivable, as opposed to borrowing against them as you would do with a bank line of credit. By selling your invoices, you generate immediate cash flow instead of having to wait for your customers to pay. Companies often find themselves in the frustrating position of having sales opportunities which they cannot accept because of the lack of financing to support those sales. Banks normally cannot provide adequate funding for growth due to internal credit policies and external regulatory restraints. Even if a business can qualify, the bank line of credit may be totally inadequate to support the company's sales growth opportunity. Factoring facilities are much easier to implement compared to acquiring a bank line of credit.