How do factoring companies fund their purchases?

MarkBMarkB Posts: 2subscriber
edited July 2007 in Startup Funding
Does anyone know where a factoring company comes up with the funds to purchase another company`s receivables?Kind of a broad question, I know. Any help is appreciated.Thanks,Mark Bebout


  • MarkBMarkB Posts: 2subscriber
    It seems like there are millions of them out there, is it really that easy to get into the business or are some of these companies simply generating leads for the companies that are actually doing the factoring?Also, do the factors just make money by charging the fee on receivables? So, for example, if a company charges 5% of a $100 invoice they make $5 when the invoice is collected? The reason I am asking is because it seems to to that if I have to use debt or investor capital to fund that $95 to purchase the receivable, by the time I pay the money back there would not be much left over. Am I missing something?The reason that I am asking is because I have been approached by an existing client asking me if I would be interested in factoring his receivables.Thanks for the help.Mark Bebout
  • robertjrobertj Tampa Bay, FloridaPosts: 0subscriber Member
    Excellent summary. Thanks for the information.
    Robert jrobertj2007-7-19 11:40:55
  • MarkBMarkB Posts: 2subscriber
    So I think that what I am hearing is that factoring is not for the faint of heart? If I were interested in looking at the possibility of doing some type of factoring for my client, would you suggest I work with one of these companies and assume the role of the broker?Your information has been excellent.Mark Bebout
  • sreyssreys Posts: 0subscriber

    You may want to check your state banking laws. Commercial financing is a regulated activity. In your state, you quite likely might not be able just "assume" the role of broker. You may need to be duly licensed in order to legally do so.
    Scott Reynolds
  • MarkBMarkB Posts: 2subscriber
    That is a good idea. I will check into it.Mark Bebout
  • allianceonellcallianceonellc Posts: 0subscriber
    In short and simple words, I would like to share that factoring is one incredibly popular option that many businesses in many industries, are starting to pursue. Factoring can help you to turn your outstanding invoices into cash quickly, as well as offering a full credit control facility.
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