FAQs - Frequently Asked Questions
. . . about Accounts Receivable Factoring
- Does my business need good credit to factor?
- How does factoring affect my customers?
- What is non-recourse?
- How many invoices am I required to factor?
- Do other businesses use factoring?
- How can my business benefit from factoring?
- Is factoring more expensive than other sources of financing?
- What makes Hamilton different from its competition?
Does my business need good credit to factor?
Businesses do not have to have an outstanding credit history to factor. Instead, Hamilton primarily analyzes the customer's credit. This means Hamilton looks at the credit-worthiness of its clients' customers and their ability to pay. This is beneficial to new companies that do not have an established credit history to secure loans or other
How does factoring affect my customers?
Hamilton goes to great lengths to remain in the background of its clients' customer relationships. Clients maintain primary interface with their customer accounts and operational functions to ensure smooth transactions.
What is non-recourse?
Hamilton maintains a modified non-recourse structure, which means Hamilton assumes only credit-risk in its agreement to factor. Hamilton incurs losses greater than $5,000 if the reason for non-payment is due to credit failure or insolvency of its clients' customers.
How many invoices am I required to factor?
Hamilton allows companies to factor when, and how often, the need arises. A company can factor all its invoices
one month, and none the next, depending on their cash flow needs. While there is no monthly minimum per se, it is not worth your time, nor ours, if you don't factor at least $10,000 in invoices during most months.
Do other businesses use factoring?
Although factoring is not common knowledge to all businesses, it is often used in the business world. Many companies, including Fortune 500 companies such as Applied Materials, Bethlehem Steel, Xerox, and Lucent Technologies, use factoring as a form of financing.
How can my business benefit from factoring?
- Focus on business operations instead of cash flow concerns;
- Increase production and sales;
- Take advantage of trade discounts, or those discounts offered by suppliers for early payment;
- Meet payroll or payroll taxes;
- Finance expansion without debt;
- Fund marketing or e-commerce projects;
- Pay off outstanding debt;
- Improve credit rating with timely payments;
- Improve balance sheet by increasing cash and decreasing A/R;
- Eliminate need for outside investment, such as loans, credit cards;
- Position business for outside investment, such as bank financing or SBA loans.
Is factoring more expensive than other sources of financing?
It depends. Compared to bank funding, yes. However, factoring remains cheaper than most forms of equity (venture capital) funding. Utilized in an efficient way, factoring can be quite cost-effective. Here are some options:
- Knowing the typical payback period of customers will allow a business to factor an invoice at the right time along its payment cycle, and thus reduce the cost to that business. For example, if a customer usually pays on the 40th day, a business might want to factor the invoice on the 20th day to limit the fees charged.
- With the funds it receives from factoring, a business can take advantage of early payment discounts offered by their suppliers. For example, a business might be able to save 3% from its supplier if it uses factored money to pay off debt within 15 days.
- With more working capital, businesses have the capability to purchase higher volumes of supplies, thus making them eligible for volume discounts from suppliers.
- A business can stop offering its customers early payment discounts since it receives its funds immediately from factoring.
- A business could increase its prices to offset any fees incurred from factoring. It could also increase its prices by a percentage and offer an early payment discount at the same percentage to those customers who pay within a given period. This way, timely paying customers would pay the original prices, while late paying customers would offset any factoring fees.
What makes Hamilton different from its competition?
Whether it's through diverse product offering, unmatched flexibility, or superlative customer service, Hamilton is driven to be a leader within the factoring industry.
Hamilton's commitment to their clients is unmistakable. Every decision Hamilton makes is based on their clients needs, tailored to help their clients reach their full potential.