What types of businesses use factoring?

Factoring, also commonly known as invoice factoring, is utilized by most business-to business industries. While factoring can benefit most businesses at any stage of their lives, there are certain types of businesses which benefit in particular:

1. Any business which operates on terms of Net-30 or longer with their customers is a business that can benefit from factoring their invoices.
2. New, un-established businesses find same-day payments to be particularly useful. Since traditional bank finance is dependent upon longer earnings histories and collateral that a new business will generally lack, those sources of funding are usually not available. Factoring, on the other hand, is only interested in the quality of the invoices being presented for payment, regardless of the age of the company.
3. Businesses who are experiencing fast growth can be greatly helped by a factoring program. Even once companies can qualify for bank financing, that financing is often too rigid to quickly respond to large upswings in growth and can stifle a company’s ability to take opportunities when they come. Factoring terms are much more flexible than traditional bank finance – funding levels can increase rapidly as growth increases.