As added security to ensure payment on all invoices, your factor may require that you maintain an escrow account.
The funds held in escrow would be used to pay-off severely aged invoices, invoices involved in trade disputes, or insolvency issues.
Escrow accounts can be managed in a number of ways.
"Other factors require you to maintain an escrow account with them. Hamilton does not."
The amount required to be maintained in escrow may either be a static dollar amount or a percentage of outstanding, factored invoices. In most cases, the escrow account is replenished by withholding funds from advances and/or remittances. Thus, should any adverse events arise concerning invoice payback, the factor can be compensated by debiting the escrow account.
Cash tied up in an escrow account is simply not affordable for some businesses. Recognizing this, Hamilton will forfeit the requirement to maintain an escrow account. In this case, severely aged invoices are paid directly by the client, rather than from an escrow.