Factoring is a sort of financial transaction as well as a debtor finance which is used by the businesses in order to sell its accounts receivable to a third party at a discounted rate. This type of service is incorporated for maintaining a steady flow of cash. For new businesses, it is quite difficult to acquire loans. They have to present satisfactory profit record along with minimum two years of experience in the business. With a factoring service, businesses can get immediate cash for carrying out the various business related activities.
How Do These Factoring Companies Work?
There are three parties that are involved in the whole process; the factor who makes the procurement of receivable invoices, the one who puts the invoices for sale and finally the debtor who possesses a financial liability for making the payment. The invoices are usually related with the goods sold. The factoring companies in Houston TX serve as an ideal substitute of the conventional means of getting funds.
As a seller, you would provide the invoices to a third party for the purpose of obtaining the necessary cash. This procedure is mostly incorporated by businesses that run out of the necessary fund in order to perform the required functions.
Origin of the Factoring Services
The birth of the factoring service lies within the ancient Mesopotamian culture with the factoring rules preserved till date among the codes of Hammurabi. As a business, factoring came to life in England during 1400 and from there travelled to America around the year 1620. Over the passage of time, factoring transformed which was mostly driven by the changes that took place with the companies of that period. Later on, the Governments facilitated the factoring as well as understated various guidelines for it. In accordance to the law, if a debtor was not notified about the collection of money owed, the deal or transaction between invoice seller and factoring company was considered to be invalid.
The Present Day Factoring Services
Till today, the main objective behind the factoring services remains the same which is to provide the necessary fund to the rapidly growing smaller companies. With the advent of internet, the entire procedure of factoring has rapidly increased in terms of execution and also decreasing in terms of associated costs. Nowadays, one doesn’t need to go out in search of a factoring service provider.
With internet, you can easily get connected to one of the service providers. Also, internet has resulted in the collaboration of the factoring service provider and the client in a real time basis. The need for delivery of original documents is also eliminated by acceptance of duplicate copies of the legally signed originals. Along with facilitating new business owners to successfully seek the necessary funds, the factoring companies have allowed small businesses to grow and compete in the market.
Author’s Bio: Simon Hopes is a leading author of various contents related to the factoring services. He emphasizes his readers to get in touch with the factoring companies in Houston TX for getting assistance for necessary business funds.
