Accounts receivable factoring has a long history financing the apparel industry that goes back thousands and thousands of years. In fact, apparel factoring engendered the birth of invoice factoring as a viable commercial financing option. Textile loans and factoring was necessary for garment production and manufacturing because there was a natural lag from the time when clothing was produced to when it was shipped, stocked and ultimately sold on store shelves.
Receivables Factoring Was Practically Invented for Financing Apparel Industry
To keep businesses moving forward, those in manufacturing could not reasonably expect to wait all that time, several weeks or more, to get paid for their line of products. How could they cover the costs associated with the next round of production – staffing, equipment, machinery, raw materials, energy, overhead, etc. – when they still had not collected on payment for the previous line of production?
Textile Loans and Factoring Serve the Apparel Industry Well
Recognizing that this payment gap would be problematic for even the most prosperous businesses, the idea of financing textiles was born. By using the invoice itself as collateral and getting cash right away by selling it, manufacturing factoring for the garment and apparel industry came to be. Now the manufacturing process did not have to be stopped because lack of immediate financing. Textiles and garments continue to use this method of financing to this day because it has proven to be widely successful.
Factoring apparel industry may have been the birth of factoring receivables but from there, the use of factoring spread to several other sectors both in and out of manufacturing. Any sector where the business cycle requires a delay in payment, such as trucking, government contracting, transportation, freight and many more, can benefit from factoring receivables. Those businesses with a seasonal cycle with peaks and valleys also tend to pair well with fast-moving financing method that is built to keep up with the ever-changing pace of your business.