How do Factoring Companies differ from banks?
Factoring is where an advance is made immediately available to a Client against the purchase of an accounts receivable by a Factor. The Factor then collects the receivable. The balance of the receivable less any fees due to the Factor is then payable to the Client. Banks are regulated by the Federal Government and must comply with stringent guidelines. Business borrowers must provide banks with information such as minimum net worth, annual audits, monthly financial reporting, and other proof of financial stability. A factoring company does not have to comply with the same type of regulations. Therefore, it has the flexibility to offer innovative and flexible financing solutions to their clients.
