Frequently Asked Questions About Factoring (FAQs)

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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 financing.

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 does not require you to factor every customer account. However, the minimum number of invoices you are required to factor every month depends on the program you choose. HamiltonFlex has no volume requirements. This flexibility 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. HamiltonSelect does have minimum requirements to factor (terms negotiable).

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

Payoff 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? 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 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 payoff 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 its through diverse product offering, unmatched flexibility, or superlative customer service, Hamilton is driven to be a leader within the factoring industry.

Hamiltons 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.

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