Simply put, invoice factoring involves three things: (1) the sale of a company's receivables, invoices or assets at a discounted price (2) to a factoring company (3) who shall receive direct payment from the client's customers.

The origin of factoring can be traced way back 4,000 years ago - ever since commerce began. The idea was first used during the time of King Hammurabi of Mesopotamia in a place deemed as the "cradle of civilization." Historically it was the Mesopotamian people who developed writing and they also structured business codes and government.

But the idea of selling promissory notes at a discounted price - another form of factoring - started with the Romans. Then, the first documented use of factoring occurred in America some time prior to the revolution, when animal furs, cotton, and even materials such as timber were shipped from the colonies to Europe. Merchant bankers in London advanced cash to the colonists so that the Americans could continue to harvest their new land. In other words, these factors during the colonial times made advances against the accounts receivable of their clients, the Americans, allowing them to continue with their work. Soon, it was during the Industrial Revolution when factoring became more focused on credit when they helped clients in determining the creditworthiness of their customers and setting credit limits. Only the factor that could ensure payments for customers are approved - and this speeds up the whole transaction.

Invoice factoring services can be an advantageous resource tool for business owners throughout the world, specifically during a trying economy. For what reason Because getting a loan from traditional financial institutions like banks can be a difficult and slow process. Invoice factoring services, on the other hand, provide short-term working capital to growing businesses who often find it hard to obtain financial help from traditional forms of funding.

Since many companies do not get paid right away after they've delivered a product or a service, it can negatively impact their cash flow, making it hard for the business to manufacture new orders. After all, supplies have to be on hand to continue making the products. Invoice factoring can be an advantage to a business that doesn't get paid for 30, 60 or 90 days. How? Factoring companies can advance to a maximum of 90% of the total invoice and this funding can be given in as little as 1 day.

Remember to differentiate factoring from a loan; it's after all, the purchase of a company's receivables. Factoring is not the same as traditional bank loans because the latter typically involve two parties, while factoring involves three parties. A bank bases its decisions on the creditworthiness of the company. On the other hand, factoring companies look at the value of the client's receivables to make a decision. When availing the services of an invoice factoring company, no minimums, maximums and complicated application processes are involved.

So what are your waiting for? Avail of the newest type of invoice factoring, spot factoring now and make it part of your business growth strategy.