Start up businesses as well as expanding businesses need working capital. Even established companies from time to time need a source of fast capital. The simplest and fastest way for a company to obtain this much needed working capital is to factor it receivables. Companies are asked by their customers to give them credit or terms. The terms or credit that is extended is usually for thirty days to pay. But of late we have seen this being extended to sixty and ninety days. Credit crunch is effecting everyone and customers are wanting to use their suppliers as their bank by obtaining lengthy terms and stretching out their payments to these suppliers. Businesses only have so much working capital or cash accessible to pay bills and meet payroll. If they consume all of their money to fill contracts and pay payroll they can’t acquire raw materials or fill new orders until they obtain the money that is due them. If they can’t borrow any capital then the business must stop immediately taking orders or acquiring material until they get paid. This is why factoring works so well with many businesses. The factor or asset based lender is able to advance against the capital that is owed to the business owner and they can keep things running smoothly. If the company has the profits built into its sales they can grow and expand as they get new orders or contracts. Businesses growth is not limited. As long as the business has sales and profits they are only limited by their ability to perform. Not by the availability of working capital. Factors and asset based lenders leverage receivables for delivered and accepted merchandise or completed work. The clients they deal with determine how much they can borrow or grow. The factor looks to their clientele as the source of granting credit. Banks limit credit due to age of the business, historical growth, leverage and many other financial ratios. Factors take a look at the customer base and the company’s ability to deliver the product and service at a profit. Factors do not limit a company on how quick or large it can grow. About the only restriction a company will run into from a factor is if the company has a concentration with one particular customer. They may limit how much you can levergae against those receivables. This really isn’t a bad thing as being captive to one particular customer is never good for any business.