Factoring is Nothing New: The Code of Hammurabi
Simply put, factoring is a method some businesses use to obtain cash.
But to dig deeper into factoring, we need to travel back in time… to as early as 1772 BC in ancient Mesopotamia and the Babylonian law code called The Code of Hammurabi. Sound familiar? This code is one of the oldest deciphered writings of significant length in the world and includes the controversial law of “an eye for an eye, a tooth for a tooth.” It also includes rules on the financing of trade or as we now call it: factoring. From there, we can trace it to England prior to 1400, and it then came to America with the Pilgrims around 1620.
But what is factoring in its modern form? Factoring is a financial transaction in which a business sells its accounts receivable (i.e., invoices) to a third party (called a “factor”) at a discount. Transportation factoring or freight bill factoring is when a carrier / fleet owner sells their freight bills (i.e., invoices) to a factoring company and is advanced between 90-95 percent of the value of the freight bill / invoice for a fee.
What are the Benefits of Factoring?
1. Increase cash flow
2. Make payroll
3. Cover operational expenses
4. Expand business
5. Alleviate “back office” headaches like collections
Factoring is a solution for many industries, including manufacturing, staffing, distribution, government, oilfield & gas and many other business-to-business industries where a constant cash flow is necessary. Visit the Freight Factoring page to learn more!