{"id":8926,"date":"2016-03-18T16:13:34","date_gmt":"2016-03-18T16:13:34","guid":{"rendered":"http:\/\/www.openbusinesscouncil.org\/?p=1607"},"modified":"2020-02-27T09:01:38","modified_gmt":"2020-02-27T09:01:38","slug":"the-history-of-invoice-financing","status":"publish","type":"post","link":"https:\/\/www.footballthink.com\/the-history-of-invoice-financing\/","title":{"rendered":"The History of Invoice Financing"},"content":{"rendered":"
\"SME<\/a>
SME trade finance invoice financing openbusinesscouncilorg<\/figcaption><\/figure>\n

The History of Invoice Financing.<\/strong><\/p>\n

The history of business Finance is mixed somehow with the history of finance. In order to run a business you need finance. Business finance has been evolving until modern times when alternative finance, trade finance<\/a> and special the advent of fintech brought new opportunities for SMEs to advance and develop their businesses. Business Finance includes among other areas Invoice Financing and factoring.<\/p>\n

The history of Invoice Finance is critical for businesses and can be divided into two major branches: factoring and invoice discounting. And its relevant history is also divided into two parts.\u00a0In these series of articles we will elaborate about the history of Invoice financing and its related products. This first one we will elaborate on the History of factoring and\u00a0History of invoice discounting.<\/p>\n

Invoice\u00a0financing\u00a0is a powerful part of the history of business finance and historically is a powerful relative\u00a0secure way of borrowing for a business and fills in the time delays in the working capital<\/a> needs that a business faces for its growth and daily operations. It provides the much needed cashflow where longer payment days are agreed to with an end debtor. In short, a business raises money, finance against an invoice sent to a client, before the client has actually paid.<\/p>\n

In order for invoice discounting to work, a given financial organisation, alternative finance or bank will fund a percentage of the value of those invoices and usually take an assignment over the receivable and thus the money that will come in, in the future. It is rare that the full amount of the invoice will be advanced, and it is typically between 65%-90%. Once a facility is set up the amounts will change depending on amount and of course the frequency of invoices paid by clients, the respective credit risk on end debtors and how many invoices are generated during the process.<\/p>\n

History of factoring.<\/strong><\/p>\n

Factoring began in England before the 1400s and it was introduced into America by\u00a0travelling pilgrims around the year 1620. These financing techniques are usually associated\u00a0with merchant banking activities of the times, which evolved with non-trade related\u00a0financing that crept into the market. Factoring has greatly changed like all other financial\u00a0instruments. The main organizations changed, with the main reason being due to\u00a0technology and air travel. There were further changes due to technological advances which\u00a0supported non-face to face communications starting with telegraph capabilities, moving to\u00a0the telephone and finally to computers. The common law framework in the United States\u00a0and England are being modified which also drove some of these changes.<\/p>\n

The English common law stated that without the debtor being notified, a factoring facility\u00a0between sellers of invoices and lenders are not possible. The legislation for the Canadian\u00a0Federal Government still reflects this stance and so does the provincial government\u00a0legislation that is modelled after it. By 1949 most of the state governments had adopted\u00a0rules in the United States, stating that the debtors need not be verified which made the\u00a0non-notifying factoring arrangements possible.<\/p>\n

\"English<\/a>
English Common Law<\/figcaption><\/figure>\n

History of invoice discounting.<\/strong><\/p>\n

This method of financing was introduced in the industry approximately 4000 years ago,\u00a0when King Hammurabi ruled over Mesopotamia. This is the period in which the Babylonian\u00a0and Sumer empires existed, which was eventually followed by Romans selling promissory\u00a0notes to obtain discounts.<\/p>\n

Modern day financing can be traced back to the 1300s when money in Italy was offered\u00a0against payment and delivery of grain. Following this, merchant banking was introduced\u00a0when funds were exchanged for goods before they were shipped to other countries.<\/p>\n

Before the American Civil War, commodities and furs were transported to Europe through\u00a0the colonies using intermediaries. Most of the finance flows were observed in the textile\u00a0and garment industries as raw materials were being purchased and textiles being\u00a0manufactured. These financiers offered funds to more foreign traders and dealers had to be\u00a0appointed to handle customers who are overseas. The dealers were also responsible for\u00a0selling, delivering goods and also holding all goods on consignment.<\/p>\n

The increase in invoice financing continued into the transportation and textile boom of\u00a01940s. Banking regulations and rising interest rates discouraged most individuals from using\u00a0traditional methods of financing.<\/p>\n

This article will continue with other parts.\u00a0_____________________________________________________________________________<\/p>\n

This is an article brought to you by tradefinanceglobal.com. This is the first from a series of insights and general resources for SMEs and SMEs Trade Finance.<\/p>\n

Find out more about trade\u00a0finance and invoice financing on:\u00a0https:\/\/www.tradefinanceglobal.com\/invoice-finance\/<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The History of Invoice Financing. The history of business Finance is mixed somehow with the history of finance. In order to run a business you need finance. Business finance has been evolving until modern times when alternative finance, trade finance and special the advent of fintech brought new opportunities for SMEs to advance and develop […]<\/p>\n","protected":false},"author":7,"featured_media":8869,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":""},"categories":[25],"tags":[],"acf":[],"yoast_head":"\nThe History of Invoice Financing - OpenBusinessCouncil Directory<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.footballthink.com\/the-history-of-invoice-financing\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The History of Invoice Financing\" \/>\n<meta property=\"og:description\" content=\"The History of Invoice Financing. 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