Some businesses want to grow faster than their current cash flow will allow. Often times banks and traditional lenders do not like to lend against future possibilities. This is where the practice of factoring comes in. Factoring is when a company buys your accounts receivable for immediate cash. The factor gives a large percentage of the money to their client up front and the remainder, minus a small discount, when the client's customer makes payment.
Inc. Magazine recently featured an article about Leota dress company that was growing so fast they almost went bankrupt. This happened because they owed their suppliers money before their customers were paying for their product. By using a factoring company Leota was not only able to stay in business, but continue to grow. You can read the whole article at Inc.com.