Wells Fargo (NYSE:WFC) announced it will acquire the factoring business in North America, a division of GMAC Commercial Finance, which is their global factoring arm.
Factoring is the practice of selling receivables for cash to another entity in order to increase liquidity. The cash is normally offered at a portion of the value of the receivable. A factoring company gets their cut when the customer pays. In other words they’re an intermediary.
The specific portfolio being acquired by Wells Fargo reportedly includes about 150 small and medium-sized clients which generates close to $4 billion in factored receivables business on an annual basis.
GMAC Chief Executive Officer Michael Carpenter is shedding non-core assets so the company can focus on its auto financing business after suffering losses connected to their home lending business.
GMAC spokesman Jim Olecki reiterated this saying it was part of GMAC’s strategy to “refocus resources on core operations and streamline operations to restore financial performance.” Olecki added the division was listed as a discontinued operation in the fourth quarter, which essentially meant it was for sale.
The factoring business will be enfolded into the Wells Fargo Trade Capital unit, which is managed by Stuart Brister. Wells Fargo has implied in the past they want to expand their factoring business, which as of 2008 was the largest in the United States as far as in relationship to a bank.
