Factoring is a practice whereby you sell your receivables
for a discount before they are due. Factoring has been
heavily used in some industries, such as the garment industry,
and less in others. Today entrepreneurial factoring companies
are willing to buy creditworthy receivables from just
about any industry.
Factoring is a relatively expensive means of obtaining
financing. You are paying for the cost of the capital,
the extra risk including bad debt, and the paperwork factoring
requires. If you can finance your business through other
sources, particularly the more traditional ones, you will
certainly save money.
However, factoring can be veru welcome to a growing business,
especially one that cannot obtain the necessary capital
through traditional borrowing.
By Source Streetwise Small Business Start-Up