A Brief History of Factoring (Accounts Receivable Financing)

Factoring

The idea of speeding up a company’s cash flow through factoring is not new. Some variations of factoring go all the way back to the early days of civilization. Here is a short history of how factoring has evolved through the years:

2000 B.C.

Traders in ancient Mesopotamia (modern-day Iraq, Kuwait and Syria) use a form of factoring in their business dealings.

1300s

Modern factoring begins to take shape in England as a form of financing for clothing merchants.

1600s

Factoring comes to the New World. American colonists seek advance payments on raw materials like timber, tobacco and cotton shipped across the Atlantic to England.

1800s

The Industrial Revolution sweeps across Europe and the United States. Non-recourse factoring for clients that have creditworthy customers becomes more common.

1910s

Garment and textile companies in the United States use invoice factoring as a way to continue buying raw materials.

1940s

Some U.S. banks start providing factoring services. Factoring booms in textiles and manufacturing, reaching a volume of $2.5 billion in 1948.

1970s and 1980s

Rising interest rates and bank regulations make factoring a more popular form of financing.

1990s

Major banks and financial giants like GE Capital and GMAC get into factoring. Smaller factoring companies start up, targeting specific industries.

2000s

Technological breakthroughs like Internet access and cloud-based platforms make factoring faster and more accessible to companies of all sizes.