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Accounts receivable factoring is a form of business financing that allows you to sell your accounts receivable in exchange for immediate cash. This provides you with the financing you need and capitalizes on your strongest asset - your receivables form strong credit worthy customers.

The receivables factoring process is very simple and works as follows:

1. Your company delivers the goods or services to the customer

2. An invoice is generated and sent to the the factoring company

3. The factoring company advances you between 70% and 90% of the gross value of the invoice. This is your 1st installment

4. Once the factoring company receives payment from your customer, the remaining funds are advanced as your 2nd installment (less a small factoring fee).

An accounts receivable factoring financing line can provide you and your business with a number of benefits. The following are just a few of them:

1. Factoring receivables provides you with predictable cash flow. You will no longer have the uncertainty of when you’ll be paid

2. Your receivables factoring line has no set maximum and is tied to your sales growth. The more you sell - the higher will be you financing line

3. The factoring company helps you determine the credit of your customers before you sell to them. This helps reduce bad debt significantly

4. Accounts receivable factoring lines can be set up in a few days

As a Factoring Company we offer many advantages that can help you grow your business quickly. Here are some of the major advantages:

1. Get better customers.
   We’ll act as a credit department and check your customers payment history before you sign them on

2. Get the funding you need.
   We are well capitalized and can support small, midsize and large enterprises

3. Quick decisions.
   As opposed to a bank, we’ll never keep you waiting

4. Easy to work with.
   We have simplified the process of giving you money

5. Grow your business.
   A factoring company can be a great partner for your business, providing you with the necessary funding and credit expertise to grow and succeed.

   More benefits...

As opposed to a business loan or line of credit, accounts receivable factoring is easy to obtain and can be set up in about a week. The biggest requirement is that your company do business with reputable commercial (or government) customers.

Additionally, as a full service factoring company, we can also provide you with credit analysis, collection, and accounting services necessary to collect your invoices.

As opposed to most banks that lend you money against hard collateral, invoice factoring companies buy your invoices outright. The factoring company buys your invoices and provides you with funds immediately, while they wait to get paid by your customers. Factoring is best described with an example:

1. Let’s say that you sell services to Company A and Company B.

2. As soon as you provide the services, you send the original invoice to the factoring company.

3. The factoring company submits invoice to the companies A and B.

4. The factoring company waits to get paid by your customers. Once paid, any remaining funds are remitted to your company.

   The invoice factoring process can be repeated every time you invoice, providing you with a flexible line of financing that grows with your business.

Receivable factoring transactions are commonly done as a two-installment sale. The first installment is called the advance and is paid to you as soon as you submit the invoices. Advances can range anywhere from 60% on the low end up to 90% of the gross value of the invoices. The average advance is about 80%.

The remaining installment, called the rebate or reserve, is remitted to you once the invoice is paid. Factoring fees are deducted from the rebate.

Generally speaking, receivables factoring will help you if you have a business that has reasonable profit margins or is growing quickly. Mid size companies with 20% or more profit margins or large companies with 15% profit margins can usually do well with accounts receivable factoring.

To qualify for factoring, you must:

1. Do business with commercial customers

2. Have a profit - or plan to have one soon

3. Have profit margins (or plan to have them) of 20% or more

The receivable factoring rates or discounts, are determined by the following factors:

1. Monthly volume

2. Quality of Account Debtors/Customers

3. Other risk parameters

Factoring rates can range from 1.5% to 3% a month depending on all these parameters.

Factoring receivables is a great resource for companies that have great paying - albeit slow paying - customers. To work well, the company should have profit margins of at least 15%. However, higher margins of 25% - 50% are more desirable.

Factoring works well for companies that have hit the wall and are turning away new business opportunities because of lack of money. In these instances, factoring will almost always allow you to grow your company immediately and will more than pay for itself.

Receivable factoring works well for almost any industry. Some very successful staffing companies, trucking companies, IT consultancies, construction firms, manufacturers and service providers have used factoring to dramatically grow their businesses.

At HGS FUNDING there is no application fees, or any other initial fees unless you have no invoices to factor.

No. You choose which invoices you want to factor and which invoices you want to keep as your own. There is no requirement to factor all of your invoices.

Yes. A first position on all accounts receivable is required while you are factoring.

This usually is not a problem. Most banks are willing to subordinate their first position lein on receivables to factoring companies.

Given the example above consider the time value of money and the benefits of improved cash flow to your business. By having cash for your invoices within 24 hours are you able to pay your suppliers faster and receive better discounts? Are you able to fulfill your next order to XYZ Company and make payroll without tapping your line of credit at the bank? Can you offer longer terms to larger customers and attract more business? Can improved cash flow help your business grow or survive without incurring more debt at the bank? Can the financial benefits of improved cash flow to your business offset the fees of Factoring, and then some? In many cases factoring is a smart business decision.

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If we fund your company directly, we will be compensated through our standard factoring fees.

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