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Factoring In

Consolidation in factoring may help entrepreneurs.

When elephants dance, mice get squashed. So The Wall Street Journal implied in a May story about the impact on entrepreneurs of consolidation in the factoring industry. Not so, says Bruce Jones, deputy executive director of the Commercial Finance Association. While there are fewer big players in factoring, says Jones, "smaller factors have been growing like gangbusters."

Factors, which provide cash in exchange for a slice of uncollected book income, actually increased their volume from $76 billion in 1998 to $80.12 billion in 1999. What's more, says Jones, consolidation layoffs provide talent for new start-ups in the industry.

"It's a growing business," agrees Daniel J. Borgia, an associate professor who's studied factoring at Florida Gulf Coast University in Fort Myers, Florida. He's seen more and more independent factors enter the industry over the past 15 years.

Although their fees can be high (2 to 7 percent of the invoices' value per month), Jones says new players are expanding factoring's boundaries beyond traditional niches in the garment and toy industries. "They can go into frozen fish, fresh flowers and services like trucking," he says.

With so many options, entrepreneurs should be the ones dancing for joy.

Freelance writer Chris Sandlund is a former editor of Success and Home Office Computing magazines.

Contact Source

  • Commercial Finance Association, (212) 594-3490, www.cfa.com

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This article was originally published in the December 2000 print edition of Entrepreneur with the headline: Factoring In.

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