| Accounts receivable funding, also known as factoring, | | | | loans aren't available. Another factor is that 59% of |
| continued an upward trend in 2005 with volume | | | | all '05 volume was represented by the textile and |
| exceeding $112 billion. This represented a 9.3% | | | | apparel industries. Most of firms of this nature are |
| increase over the prior year, which is the strongest | | | | located in the east. |
| year to year growth rate since 2000. In fact, only | | | | Most factoring volume (72%) involved clients selling |
| 2001 was the only year in the past 20 that factoring | | | | goods to retailers. Only 9% were service provider |
| volume did not rise. A/R funding continues to be an | | | | clients with the remainder (20%) being clients selling |
| accepted part of financing, but according to the | | | | goods to anyone other than retailers. Clearly, even |
| Commercial Finance Association's Annual Asset Based | | | | though factoring volume is increasing each year, |
| Lending and Factoring 2005 Survey, two thirds of the | | | | there are still several industries that could benefit |
| volume came from the northeast and southeast | | | | from using factoring as a financing tool. |
| parts of the country. The northeast is the major | | | | Factoring is a largely a non-recourse, notification |
| region for factoring volume with 42% of the total. | | | | business. 80% of factoring was on a non-recourse |
| The survey indicated that only 5% of factoring | | | | basis. This means that if a customer doesn't' pay, the |
| volume came from the Midwest, which includes some | | | | factor can't come back to the client for payment |
| highly populated states with a plethora of companies | | | | (unless the non payment is the result of product |
| that typically use A/R funding. States in the Midwest | | | | disputes and liability or fraud). The majority (85%) of |
| included in the survey were Illinois, Michigan, Ohio and | | | | factoring was performed on a notification business. |
| Missouri. Why are the totals so low for these states? | | | | This arrangement requires clients to notify their |
| One reason could be that Midwest firms typically | | | | customers that their accounts receivables have been |
| become utilize more traditional means of financing, | | | | assigned to a company and that payments should be |
| and are hesitant to look for alternatives when bank | | | | remitted to the factor. |