Credit Crisis Sparked Factoring Boom

PRLog (Press Release) - Sep. 28, 2011 - With traditional financial institutions curtailing small business lending in the aftermath of the economic crisis, Merchant Cash Advance companies have stepped into the breach to fund expansions and operations at small and midsized U.S. businesses. Because Small Business Cash Advance funding is considered non-lending finance (factors buy invoices or accounts receivables at a discount, rather than loan against them), the industry is largely unregulated, particularly in comparison to banking. Factoring often comes with higher cost.

“Until the past few years, the main funding supplier of capital for business in North America was the banking system, There are now fewer banks than a couple of years ago. Many have failed and many have been acquired. What that means for the smaller companies is that there are now less opportunities to go and seek out capital.”

Mike Lubansky, a senior financial analyst at private company data provider Sageworks, says Merchant Cash Advance is going mainstream: “In the past, some may have seen factoring, because of its higher cost, as associated with troubled situations. But now it’s just another source of financing, especially for funding that businesses need to grow when banks that have tightened credit standards and are focused on preserving capital are not able to lend as much.

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