Before the 20th century, factors were mercantile intermediaries whose main functions were warehousing and selling consigned goods, accounting to principals for the proceeds, guaranteeing buyers' credit, and sometimes making cash advances to principals prior to the sale of the goods. Their services were of particular value in foreign trade, and factors became important figures in the great period of colonial exploration and development.
Mercantile factors A relatively large mercantile company could have a hierarchy including several grades of factor. The
British East India Company hierarchy ranked "factors" between "writers" (junior clerks) and "junior merchants". In North America the
Hudson's Bay Company, as restructured after merging with the
North West Company in 1821, had commissioned officers who included the ranks of chief trader and chief factor. They all shared the profits of the company during its
monopoly years. In the deed poll under which the HBC was governed, there were 25 chief factors and 28 chief traders. Chief factors usually held high administrative positions. The
Dutch East India Company and the British East India Company based factors at trading posts in numerous sites all over Asia. In 18th- and early 19th-century China and Japan, however, the governments limited European traders to small, defined areas: the Dutch Factory was allowed to operate on
Dejima, an island off Nagasaki, before the opening of trade with Japan; and in China the British were limited to
Thirteen Factories and
Shamian Island areas of
Canton.
Colonial factors In territories without any other regular authorities, especially if in need of defence, the company could mandate its factor to perform the functions of a governor, theoretically under authority of a higher echelon, including command of a small garrison. For example,
Banten, on the Indonesian island of
Java, was from 1603 to 1682 a trading post established by the East India Company and run by a series of chief factors. The term and its compounds are also used to render equivalent positions in other languages, such as: • Chief factor for the Dutch
oppercommies, for instance of the
Dutch West India Company on the
Slave Coast of West Africa. • Chief factor for the Dutch
opperhoofd (literally 'supreme head'; but also used for a
Tribal Chief, as a
Sachem of American Indians), e.g. in the Dutch factory on Dejima, mentioned above.
Debt factors A debt factor, whether a person or firm (factoring company), accepts as assignee book debts (
accounts receivable) as security for short-term loans; this is known as
factoring. ==Judicial factor==