In the United States during the 20th century, nearly the entire textile industry utilized factoring.

In the United States during the 20th century, nearly the entire textile industry utilized factoring.

In previous posts, the topics covered suggest that there is a major boom in the industry of alternatives to bank loans, namely invoice factoring. One could argue then, that a new page in the history of factoring is being written.

What many don’t realize however, is that the history of factoring goes far beyond the previous decade. Rather, its history is one filled with great depth. The Oxford Quarterly Journal of Economics notes in an article entitled Four Centuries of Factoring that, “the factor’s calling is among the oldest and, in its present-day aspect, is at the same time one of the newest of commercial activities…perhaps the most impressive, from the standpoint of the student of economic history, is that which reveals a medieval English background to modern factoring as practised in the United States.” As a side note, it’s worth noting that the article itself was published in 1939, exactly 75 years ago.

Factoring’s origins may be traced as far back as 4,000 years ago to Ancient Mesopotamia. The Babylonian King, Hammurabi, instituted a code that allowed for the idea of loaning goods in exchange for business dealings. Moreover, other groups such as the Romans utilized finance to help expand merchant dealings. This would continue even after the fall of the Roman Empire into the Middle Ages, where merchants would help to loan money in exchange for eventual pay. While these “usurers” were looked down upon, they nonetheless served as the procurers to modern banks and financing through quick pay.

The Industrial Revolution would serve to revolutionize the nature through which money was provided. As opposed to focusing on the exchange of money for goods or for a higher payout (via interest rate applied to the loan), the creditworthiness of the individual was viewed instead and taken into serious consideration. This would set up the modern day bank loan, where credit has become a key component of how loans are granted. In the United States in particular, nearly the entire textile industry relied on invoice factoring as a way to ensure that goods and services could be carried out in an expedient manner.

From the 1970’s to the present day, invoice factoring has been seen as one of the primarily alternatives to bank loans. As a result of the most recent recession, factoring is seen as being especially important as it allows individuals to secure necessary capital needed to sustain or expand their businesses without having to rely on their credit rating which may have been damaged from financial crises.

Following this proud tradition and rich history of factoring, Capital Solutions offers both invoice factoring and purchase-order financing. With invoice factoring, Capital Solutions can advance up to 80–90% of the invoice prior to the customer paying so that business owner can use those funds at his or her discretion. Purchase-order financing is a great choice for businesses that have orders ready to fulfil, but lack the cash flow to pay the supplier up front.

For more information on any of the financing options offered by Capital Solutions, Inc., call 1-800-901-3299 or click on the Contact Us tab and fill out the necessary information.