Brief History of Factoring

Aka Accounts Receivable Financing

The process of speeding up a company’s cash flow by factoring, dates back to early 1300s in England as a form of financing for clothing merchants.  Moving to the New World in the 1600s, American colonists seek advance payments on raw materials like timber, tobacco, and cotton shipped across the Atlantic to England.  200 years later, The Industrial Revolution rushes across Europe and the US.  Factoring for clients that have creditworthy customers becomes more popular.

In the early 1900s, Garment and textile companies use invoice factoring as a way to buy raw materials. By 1940, US banks offer factoring services reaching approximately 2.5 billion in the late 40s.  In the mid 1970s and 1980s the high interest rates and banking regulations make factoring a more popular form of financing.

In 1990, major banks and financial giants begin factoring.  Smaller factoring companies begin targeting specific industries. Ie trucking   Moving into the 21 century, technology breakthroughs provide internet access making factoring more accessible to companies of all sizes.