Factoring
What is Factoring?
Factoring is the sale of accounts receivable or invoices at a small discount to obtain immediate cash. Factoring gives businesses the ability to ensure growth without diluting equity or incurring debt. Factoring is one of the oldest forms of commercial finance and is used extensively both nationally and internationally. Factoring is NOT a loan. No money is loaned and no interest is paid or earned. Instead, the factor receives a fee for its services. Those fees are based on the dollar amount of the accounts receivable purchased.
Mike Semanco, President, Hennessey Capital, explains factoring. View the video
Why Factoring?
A main difference between factoring and a bank loan is in factoring a company uses its customers’ credit strength, not its own as support for funding. With a bank loan, credit is typically based on its assets, equity, profitability, cash flow and liquidity, thereby limiting the amount of funding. Under a factoring facility available funding is limited only by the amount of a company’s receivables, which allows it to meet operating demand and provide for future expansion.
The Facts on Factoring
Hennessey Capital offers:
- Up to $2.5 million in commitment amount
- Allows businesses to leverage up to 90% advance on eligible A/R
- Best suited for service, manufacturing and distribution based industries
- Can be used in conjunction with current bank facility
- Credit, collection and A/R management services included
- Online reporting
- Funding based on customer credit strength
- Available funding based on amount of company’s receivables
