The Roots Of Factoring And Small Business

A business is defined by the Small Business Association (SBA) as an entity that is

organized for profit; and one that operates as place of business in the U.S.; and must make significant contributions to the U.S. economy through payment of taxes or use of American products, materials or labor.

Most U.S. businesses are independently owned and operated, and cannot be dominant in its field nationally. That would be a monopoly. There are several different business types -- corporations, partnerships, or sole proprietorships.

Business size definitions have been established by the SBA, also known as size standards for all for-profit industries numerically representing the largest size that a business may be to remain classified as a small business. This includes its affiliates and subsidiaries. The size standards apply to the SBA's programs such as financial assistance and to Federal government procurement programs when there is a benefit. A U.S. business must first qualify as a small business concern.

It is the Small Business Act which states that no Federal department or agency may prescribe a size standard for categorizing a business concern as a small business concern, unless such proposed size standard meets certain criteria.

A number of standards and regulations for businesses exist, which is another reason factoring for small business today remains one of the oldest practices in history. It actually dates back 4,000 years to the days of King Hammurabi of Mesopotamia. These people were the first to develop writing, and who put structure into government regulations, or business code. They were the ones who came up with the concept of factoring.

Every civilization since that time that values commerce has practiced a form of factoring. But it was the Romans who first sold what we call "promissory notes" at a discounted rate.

In America, the first sign of factoring was in the American colonies when they shipped furs, cotton, and timber to Europe from the colonies. merchant bankers in London advanced funds to the colonists for these raw materials, enabling the colonists to continue to work without worries of having to wait.

In the United States, prior to the 1930's, factoring was used mostly in textiles and the garment industry because these industries descended from the colonial economy that used factoring. It wasn't until later, after the war, when factoring became part of other forms of invoice-based businesses.

by: Kristin Gabriel

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