Invoice Factoring Growth Up to the 21st Century

The history of invoice factoring goes way back to the times of King Hammurabi of Mesopotamia, over 4000 years ago. It has been playing an active role in business finance since then.  From medieval businessmen to English colonists  — and from garment textile industries to transportation industries  —  invoice factoring has a long history.

Today, with some banks limiting loans to small businesses, invoice factoring has emerged as an increasingly  popular means of alternative finance. Since factoring advances money on invoices owed to a company, it’s not technically “credit.”   So businesses can get their hands on much needed cash flow quickly, without going through some of the traditional bank loan underwriting activities.

This infographic by CBAC Funding below traces invoice factoring from ancient times, follows it through to persecuted Jews fleeing to Italy, touches upon its use to help trade with English colonists in America and highlights invoice factoring growth in the 1930s and 1940s in the United States.

It also explains invoice factoring, its benefits for small businesses and its ability to stand the test of time. The idea behind this graphic is to give you a sense of factoring’s place in history as well as its importance today to small businesses.

invoice factoring
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Pratik Dholakiya Pratik Dholakiya is the founder of Growfusely, a content marketing agency specializing in content and data-driven SEO. As a passionate SEO and content marketer, he shares his thoughts and knowledge in publications like Search Engine Land, Search Engine Journal, Entrepreneur Magazine, Fast Company, The Next Web, YourStory, and Inc42, to name a few.

5 Reactions
  1. Stephen Halasnik

    Factoring really is old school and not really smart for small businesses. There is now a new alterative to Factoring. Short term loans from companies like Payroll Financing Solutions ( which provides $5k-$100k allows companies to borrow money only when they need it and to pay it back whenever they get their money in. Unless your business is growing over 25%50% every year then factoring doesn’t make sense. Often small businesses have big increases in sales for a few weeks or months and then it flattens out. Factoring is only good if you need cash for 2-3 years but if it is less, then a short term loan is the way to go.

  2. Not sure why you make the statement, “Factoring really is old school and not really smart for small businesses.” when the site you linked clearly offers accounts receivable financing for small businesses.

    • It all depends how’s it’s done and at what price.

      Factoring encompass 3 activities:

      – receivable Purchase
      – credit Cover
      – payment collection

      Optimized It systems allow great Integration of information from Corporate, Credit insurers, banks or factors

  3. Like all things the right tool for the right job is the way to go … that said I wouldn’t want a $10K loan if I needed $500,000 in cash flow no more than I’d want to be forced into selling $100,000 in AR’s if I only needed $10K. Anyway: Why create debts when you can convert something owed to you for cash? With the right source invoice factoring can be flexibly customized to the need – and I repeat: Need.