I try and keep track of what’s going on in the receivables factoring industry by subscribing to things like Google Alerts and by plain old web surfing. Unfortunately, what I run into most frequently are self-promotional articles and blog posts all of which are essentially “An Introduction to Invoice Factoring.” Writing and distributing articles is a good way of gaining visibility online but it would be nice to see some more creative approaches to presenting the concept and the various facets of the practice of asset-based factoring.
But at least these cookie-cutter explanations present an accurate definition of receivables factoring and the basic strategies involved. The same can’t be said for the information that I read about business factoring on the website and in some distributed articles from Innuity Funding. In fact, I don’t believe that I have ever read a more erroneous explanation of factoring.
On their website, Innuity basically defines factoring as:
“…a way for businesses to sell off unpaid receipts to a collection agency so the business is able to retain a portion of the sale. Factoring usually takes place when a small business doesn’t have the time or resources to pursue a customer who does not want to pay for services rendered by your company.”
Huh?! I think when you sell off receivables to a collection agency it’s called “being turned over to collections.” And you don’t sell off your receipts. A collection agency keeps a portion of the collected amount as compensation for their services. I used to work in the grocery industry and when you had damaged product or product that was close to being ou-of-date, you sold it off for whatever you could get and wrote off the difference. We called this “salvage.”
Factoring is not salvaging. Factoring is putting your assets to work proactively and productively. It is not a fire sale on uncollectable bills.
Perhaps it is part of Innuity Funding’s strategy to misrepresent receivables factoring. I actually don’t believe that they offer factoring services. They apparently offer commercial loans and lines of-credit for businesses. If anyone was considering factoring and read the Innuity definition, they would likely run away… to a commercial loan.
A method to the madness?
So, while their are a million elementary explanations of factoring out there, Innuity’s certainly is not one of them.
