The Impact Of Factoring On An International Scale

Factoring is a form of commercial finance which provides funding services to businesses who either do not qualify for traditional financing or who desire to outsource their receivables and credit management to a third party while also having the option of drawing funds against the receivables being managed by the factor. Additionally, companies who are experiencing growth choose factoring as a finance tool due to its availability and flexibility as an aid to fuel their growth. Much can be learned about the history of factoring on the internet as well as the differences in law and practice on an international scale. This study is not about the history of factoring, it’s about the fundamentals of the industry in use today. It has been†¦show more content†¦Factoring as a financial service has existed over the ages because, when managed properly, there are true benefits to the parties of these transactions and to the economy as a whole. Both Banks and Independent Comme rcial Finance companies are providers of sustainable capital to small and large businesses. The businesses employ staff whose income supports local and national economies. Moreover, Factors establish and enforce practices and procedures designed to protect their monetary investment and thus the return of capital deployed. The economic upsets of 2008-2009 proved that exotic transactions such as collateralized debt obligations and gambling on derivatives only resulted in the disappearance of capital across the world. It remains that Factoring is a simple and easy to understand process based on a practice that has been around for thousands of years. It is expected that this financial service will continue to grow because it is an effective and sustainable way for companies to get cash injections with which to operate their business. One distinct characteristic of Factoring is that when a business uses Factoring as a means to improve their cash flow, the business is not taking on debt which it may not have the capacity to repay. The business is simply accelerating their cash flow by