Although factoring, the sales of accounts receivable for discounted lump sums of cash, goes back some 4000 years ago in the kingdom of Mesopotamia, the cash flow industry of today has its roots in two methods of finance – owner financing and factoring.

Owner Financing

The first method of financing that led to the emergence of the cash flow industry was owner financing. In an owner-financed sale, a real estate seller accepts a promissory note as a portion of the purchase price. The note is then secured by placing a mortgage on the real estate being sold.

Factoring -- Funding Receivables

The second method of finance that impacted the development of the cash flow industry is factoring, also called accounts receivable purchasing. Although factoring dates back thousands of years, it has evolved into a very modern financing technique.

When a business sells a product or service to another business or to a government, it sends an invoice in order to collect the money due. That  business can either wait for the invoice to be paid (eventually) or it can sell the invoice to a third party for a reduced amount.  Businesses can use factoring to provide rapidly available cash for growth or survival.