One of the main distinctions of factoring in relation to other forms of finance is the required collateral. Traditional commercial loans and lines of credit customarily require a blanket pledge of all assets; factoring requires only the accounts receivable and general intangibles* pledged as collateral. This distinction makes factoring an ideal form of financing for rapidly growing companies. Let’s explain why.

Consider the typical characteristics of a rapidly growing company. First, growing companies have large accounts receivable and a booming number of purchase orders. Second, due to their comparative newness, growing companies lack hard assets, such as property and equipment. Third, growing companies need sufficient cash flow to fulfill new and large orders, and generally grow operations.

If a growing company with these three conditions approaches a traditional commercial lender, more than likely, either they will be turned down for funding because their assets are not strong enough; or they will be undercapitalized because the assets they did have were valued below their need for capitalization. The later case will soon exacerbate their present undercapitalization condition.

Factoring, because of the nature of the financial instrument, only values and collateralizes accounts receivable, which happens to be for many growing companies their strongest asset. Furthermore, because the availability of cash is solely dependent on the size of accounts receivable, funding availability grows inline with operational growth. This is called scalable funding.

The collateral requirements and scalability of factoring make it an ideal financial alternative for rapidly growing companies.

*General Intangibles includes the recordkeeping that goes along with accounts receivable, such as general ledgers, accounting documents and software. Also included under general intangibles, are all other types of receivables not already defined by “accounts receivable.”

Hamilton’s Principals, Ken Walsleben and Michael Howe, were invited by the Syracuse University Whitman School of Management to present a talk to students and faculty about financing the entrepreneurial venture, as well as share their own experiences in starting a business. In front of a packed room, Ken and Mike highlighted the benefits and drawbacks of traditional and alternative financial options. They also shared with the students lessons learned from their own entrepreneurial experience, such as raising investment capital, marrying visionaries and administrators, and safely managing expansion. On previous occasions, Ken has also served as a finalist judge for the School’s Capstone Business Plan Competition.

Whitman’s Entrepreneurship and Emerging Enterprises Program is ranked among the top thirteen programs in the nation, and its Falcone Center was selected as the NASDAQ Center of Entrepreneurial Excellence in 2004.

Hamilton is proud to have the opportunity to support and prepare tomorrow’s business leaders.

We are pleased to announce that TempNet has seen fit to approve Hamilton as an associate member. TempNet is an association of independently owned and operated temporary staffing companies from around the U.S. With this membership, Hamilton hopes to continue and broaden its support of the temporary staffing industry.

During the early part of this month, Ken Walsleben and Michael Howe, the Principals of Hamilton traveled to Key West, Florida to attend TempNet’s annual conference. By Ken’s accounts the conference was a hit, “great weather, great information, and great networking. Who could ask for more?”. Hamilton was the sponsor of several conference events, and took part in an Ask the Expert panel session.

3 Ways to Breathe Fresh Air into Old Ideas
New ideas keep businesses moving forward. Unfortunately, coming up with those ideas can be hard work. Here are three tips to help you hatch up new ideas and energize old ones:

1. One of the greatest ways to invigorate your mind and your ideas is to allow yourself to enjoy some free time. According to studies, creativity peaks for two to three weeks following a vacation. So if you’re in a creative slump and can’t seem to come up with new ideas, take a few days away from the office to recharge your greatest resource, your mind.

2. Old ideas can be either your biggest obstacle or your biggest new idea. Analyze your current business processes and strategies, and determine which ideas fell apart and which were successful. Of those that fell apart, can you spin the idea in a new direction or use it in a different context to be more effective? If a bad idea can’t be recycled, maybe it is time to get rid of the mind baggage and make room for new ideas.

3. In some industries continuing education is mandatory. Why? Because it keeps you up-to-date on the latest innovations, trends and resources available, and helps to keep the industry effective and progressive. If you want new ideas to flow, it is important to continually re-educate. Make room in your schedule and budget to attend tradeshows, seminars, local mixers, etc. to stay informed. The more information you have, the more ideas you’ll have.

In regards to last quarter’s description of the set-up documentation needed to become a Hamilton Client, once I am a client what documentation is needed to factor an invoice?
Along with a copy of the invoice you sent to your customer, you would need to provide Hamilton with the following back-up documentation if applicable: work orders, purchase orders and any underlying contracts. If you were a temporary staffing firm for example, you would provide Hamilton with time cards that verify work reflected in the invoice.

How does factoring affect my internal accounting?
Hamilton’s daily and historical accounting reports work to support your existing accounting procedures. And with Hamilton’s secure, online reporting website, clients can access up-to-date account information in a variety of reporting formats. In fact, we find that many of our clients strategically utilize Hamilton’s built-in accounting services as their sole means for monitoring and accounting for their accounts receivable.
When you submit a Question to Questions of the Quarter, we will send you a free copy of Hamilton’s Pocket Guide to Factoring, a comprehensive and handily sized guide to terms and options.