Factoring
is a cash flow tool

Popular opinion contends that small businesses are driving the economic recovery and will continue to lead the nation in economic growth well into the next century. Certainly small firms are experiencing employment growth while large firms are either stagnating or shrinking. Small companies produce nearly half of the nation's output. Confirming their significant role in American business overall. But the problem is this: In general, traditional financial institutions are not providing an adequate level of service to small businesses, especially those in service industries that do not own a significant volume of hard assets which can serve as collateral for loans. Conventional, asset-based lending works against small but expanding firms that have large orders to fill but lack the financial means to expand production to meet demand.

Business financiers have historically operated on the premise that there are two basic types of capital: debt and equity. Debt capital is essentially a loan that must be repaid; it's a liability on your balance sheet that has a negative impact on your net worth. Equity capital is either the money you put into the company yourself, or it involves actually selling an interest in your company. Accepting outside equity capital means relinquishing a degree of ownership and control of your company to the funding source; how much is determined by your specific agreement.

Beyond these two traditional funding paths is the very practical source of working capital known as factoring - a financial management tool that does not create debt or require you to give up any ownership in your company.

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