Factoring

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Accounts receivable (AR) factoring is a dynamic means for business owners to get working capital to optimize their business.  When a retailer places an order with your company, the factor makes sure of the creditworthiness of the retailer and is responsible for collecting and keeping record of all payments.  For your peace of mind, if the retailer goes bankrupt, the factor will pay the full amount you are owed.  No questions asked.  Factoring makes it possible for your company to quickly receive the financing it needs while relieving you of the headaches often involved with securing that financing.

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Addressing Factoring Misconceptions

Because of its roots in the historically volatile apparel industry, factoring was once a controversial source of financing. However, as factoring expanded its reach to a wide swath of other industries over the past decade, it is now a vital and dependable resource for both start-ups and established businesses. In 2012, worldwide factoring A/R volume exceeded $2.1 trillion—$180 billion of that in the United States.

A commonly held impression is that companies choose a factor because they are not credit-worthy enough to deal with a bank. While it is true that factors often welcome in companies that banks reject, there is no added risk. Banks focus on a business’s creditworthiness, while a factor looks at the financial soundness of a business’s customers. This distinct difference allows factors to purchase the invoices of start-ups and firms with scant credit histories.

Why Hana Financial
Thousands of companies have used Hana because we have:
  • Access to over 300,000 customer credit files that enable us to determine which of your customers have the ability to pay for your merchandise
  • Experienced credit, collection, and client service personnel
  • The ability to provide you with easy-to-use online access to your account information
  • The ability to offer other financial services such as:
    1. Purchase Order/Trade Financing
    2. Letter of Credit
    3. Factor Guaranty
    4. Equipment Lease
    5. SBA Loan
  • Sufficient capital to meet your funding needs
  • Credit approval on foreign accounts
  • Provision of weekly and monthly management reports
  • Provision of advanced funding upon shipment made to your customers at no additional cost
  • The ability to investigate and assume 100% of credit risk on all of your approved customers
  • The service of managing your factored receivables, EDI invoicing, payment processing, and collection
What types of companies can benefit from factoring?
  • Rapidly growing
  • Experiencing slow receivable turnover
  • Hurt by high bad debt losses
  • Burdened with a large customer concentration
  • Start-ups or spin-offs
  • Seasonal
Factoring offers companies the following benefits:
  • Reduced credit and collection expenses
  • Higher potential of increased sales
  • Improved cash flow consistency and strength
  • Elimination of bad debt losses
  • Flexible and continuous financing
  • Improved productivity
  • Improved management information
  • Experience with international factoring
What does it cost?
There are two costs involved in factoring:
  • Factoring commission is quoted as a percentage of factored volume and is based on these variables:
    1. Factored sales volume
    2. Average invoice size
    3. Term of sale to your customers
    4. Quality of customers
  • Interest charged on advances against receivables, if applicable

The interest charge is competitive and comparable to any short-term revolving credit agreement.  Interest is charged monthly at a rate tied to major interest rate indices based on your actual daily loan balance during that month.