Source: The Arizona Republic, Jan. 1 2011, by Russ Wiles

Tight bank credit has created opportunities for rival lenders, including factoring companies.

These firms offer loans to businesses based on their uncollected billings.

“They’re getting advances on their accounts receivable,” said Robyn Barrett, owner of Factors Southwest in Phoenix. “These advances can be for certain customers or all of them.”

Factoring is an old form of financing that’s enjoying a growth spurt now.

Factoring entities say they have an edge on banks because they don’t face regulatory scrutiny on loans that can lead to tighter underwriting standards.

The companies aren’t regulated because they don’t accept insured deposits, Barrett said.

“Banks might want to see three years of positive cash flows for the business and pretty good FICO scores for the owners,” she said. “We provide (loans) based on who you’re selling to and whether they’re creditworthy.”

Factoring tends to be more costly than traditional lending. Borrowers pay 1 to 3 percent of the loan amount each month, she said. Loans typically are paid off within 45 to 60 days.