Obtaining credit in general and business credit in particular, has become Increasingly complicated and difficult, in fact, for many businesses, it has Become downright impossible.


Lending standards and requirement are now more stringent than ever and Personal guarantees are now almost always required. Traditional lending sources are often unable or unwilling to provide all of the financial assistance needed by a business. That where factoring comes in. Factoring can sometimes solve problems for a business that has nowhere else to turn.

Traditional financing can provide money for expansion of a business. However, a bank's limitations can make it unsuitable for the needs of a business that is growing rapidly because at some point the banker will deny The request for a higher credit limit, banks quality clients based on their current sales and the ability of their customers to pay.

In addition bank loans are normally short- term and become payable in less than a year.

Each time the business needs an extension it must go through the original loan procedure again. With factoring, a business can factor any amount it chooses all of its invoices or a portion of them. And the business can increase the amount of cash it receives by simply factoring more invoices. It is easier to adjust the cash flow of a rapidly growing company through factoring as opposed to traditional bank financing. Factoring is flexible and immediate.

Factoring requires no collateral, lien or security interest. That is why it is so attractive to new business. New business usually can't meet the requirements set by banks simply because they are new business. Factors can help new business because it is not a loan. It is the selling Of invoices. A business does not incur debt by factoring it is selling its invoices at a discount in exchange for cash. Additional factoring requires no penalties or lump sum payment to terminate the factoring relationship. That is the opposite of most other forms of financing.

(Source: brief introduction on factoring by Laurence j. Pino.)