What is Factoring?
History of Factoring
The concept of factoring reaches back to ancient Rome, whose wealthy producers and merchants employed a mercantile agent or “factor” to manage the sale and delivery of their goods. Records show that such factors continued to be employed with increasing frequency throughout the Middle Ages.
What is Invoice Factoring
Factoring is the purchase of accounts receivable (invoices) from a business extending credit for services rendered and/or product sold and delivered on terms to another business (B2B credit extension) by a 3rd party (normally a financial institution). It is not a loan or a traditional line of credit. Additional services are covered by the factoring company, that are not covered by a Bank. Each Factor will offer different services for their pricing. Compare wisely.
Recourse vs. Non-Recourse Factoring
When you begin your business relationship with a factoring company, you will typically be looking at two different types of accounts, called a full recourse account or a non-recourse account. For the most part, the factor will determine which type of account you will have.
Full recourse accounts are the more common of the two. A full recourse account means that you, the client, is ultimately responsible for the amount of your customer’s invoice in case they do not pay.
Non-recourse accounts are less common because they place more risk on the factor. With a non-recourse account, the factor is solely responsible for the credit of the customer and if the customer is unable to pay for credit insolvency reasons, the client will not be held responsible for payment.
For more information on this topic, see What’s the Difference Between Recourse and Non-Recourse Factoring?
Industries that Factor
Industries…
Factoring is a Great Solution for Many Industries.
Whether you are in the service industry, the manufacturing industry, transportation industry or any other industry, you can benefit from invoice factoring!
Some Industries who Factor:
Manufacturing (Apparel, Electronics, Food Processing, Fabricated Metals, Printing)
Wholesaling (Durable Goods and Most Non-Durable Goods)
Business Services (Temporary Staffing, Oil & Gas Related Services, IT Maintenance & Repair, Janitorial Cleaning & Maintenance, Commercial Printing, Security Guard Services)
Special Construction (Underground Utility and Pipeline, Excavating, Tower Inspection and Maintenance, Welding)
Transportation (Interstate, Intrastate, Hot Shot, and Freight Brokers)
At UC Factors, we have an experienced staff who are well versed in a variety of industries. Not only are we experts at factoring, but we can also help you with industry-specific billing and payment procedures.