F.A.Q.

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FAQ's-General Commercial Invoice Factoring information

Q: What is a factoring company?

A: A commercial finance company that specializes in the purchase of invoices or accounts receivable's for cash.

Q: Is factoring a new financing option?

A: Factoring has been used for centuries. Its one of the oldest form of financing. Until recently factoring was primarily used in the garment and textile industries.Today, factoring is widely used as a viable funding for all businesses that extend credit to credit-worthy commercial customers.

Q: How does factoring differ from bank financing?

A: We make factoring decisions based on the credit worthiness of your customers: a bank makes credit decisions on your financial history, cash flow and collateral. Because factoring is not a loan, no liability appears on your balance sheet. most importantly, we make funding in days or hours while banks generally takes weeks or even months.

Q: Why would a company sell accounts receivables.

A: Companies with recurring cash flow problems often can't afford to wait, 30, 60, or 90 days for invoice payment. They need cash to meet immediate financial demands of their business. Factoring provides this cash by purchasing accounts receivable, often within 24 hours after invoice is created.

Q: What companies benefit most from factoring?

A: We believe every company-and each funding situation-is unique. We view every situation as an opportunity to create a flexible, dynamic "win-win" structure. Factoring works well for startups as well as high-growth businesses, including those cyclical in nature. Factoring is also well suited for under-capitalized companies with strong customers, turnarounds or companies with cash-flow problems.

Q: How will our customers be treated by HRH Funding Q: What is the major benefit of factoring?

A: We recognize and respect the relationship and goodwill you have created with your customers. We will treat your customers with the same degree of integrity and professionalism. Any serious issues that arise will be discussed with you and handled in an appropriate manner after discussions with you.

Q: What does factoring cost?

A: Rates are based on individual and specific circumstances. Factoring rates depend on the credit-worthiness of your customers, your average invoice, average payment cycle, factoring volume and other elements. In general, the cost of factoring is outweighed by its significant benefits: access to immediate cash, credit analysis, collection work and accounts-receivable reporting.

Q: Is factoring a type of loan?

A: No. Factoring is not a loan. It is the purchase of an asset, your accounts receivable, at a discount by a financial institution called a factor. A traditional bank loan uses all of your company assets as collateral and typically requires personal guarantees. Invoice factoring or account receivables factoring relies on the credit-worthiness of your customers, not your balance sheet or history. Banks are heavily regulated, and large finance companies are driven by an assortment of pressures. When times are tough, banks and finance companies limit lending.

Small Businesses that have no track record, a weak balance sheet, a history of financial problems, are in turnaround mode or are otherwise undergoing big changes, often cannot find a lender at any price. In such cases, factoring is the ideal financial solution.

Q: What is the difference between factoring invoices "without recourse" and factoring invoices "with recourse"?

A: When an invoice is factored without recourse, it is considered factoring on a "non-recourse" basis. In this situation, the factor takes the credit risk of the client's customers, thereby protecting the client from credit loss. When an invoice is factored with recourse, it means the client is ultimately responsible for payment, regardless of whether the client's customer pays. We offer both "non-recourse" and "recourse" factoring at rates that make sense for your business.

Q: When is factoring NOT a good fit for a business?

A: Generally factoring is not a good fit in the following situations:

Your business operates on low margins (less than 10%).

Your business has significant cash reserves free of cash-flow concerns.

Your business serves as a subcontractor to a less-than-established general contractor.

Your business sells almost entirely to less than credit-worthy customers.

Your business has a significant amount of accounts receivable that are already overdue.

What Will My Customers Think?

This question tends to be of concern for companies who are considering factoring as a form of financing for the first time. We at HRH Funding Solutions can assure you that factoring is a positive statement to make to your customers. A $200 billion industry and growing, factoring is a traditional financing option for all businesses, and has been around in various forms for several centuries. Some of the largest companies worldwide use factoring as an important part of their overall financing strategy.

Note: 99% of companies that use factoring are in a growing phase ( moving to the next level ). They need the cash flow to keep up with the growing demand for their products or services.

Common questions:

Q: How will our customers be treated?

A: The relationship and goodwill that you’ve built with your customers will be treated with the utmost respect. Your personal Account Executive will discuss any issues of concern to you in this regard in a professional and timely manner.

Q: If customers know that my invoices are factored, won’t they take longer to pay?

A: No. Often, just the opposite is true. Large corporations will continue to adhere to their credit policy and pay accordingly, because it makes no difference who the creditor is. Smaller companies tend to pay faster, knowing that we, as a Factor, are an influential credit-reference resource and a prime reporter of credit information to credit bureaus.

Q: Will my customers think I’m facing financial difficulties if I factor?

A: Not at all! As long as it’s handled by a professional company such as HRH Funding Solutions, your customers will understand that you’re taking the necessary steps to meet business demands. Many companies are already familiar with factoring, since it’s a $200 billion business annually!

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