My interpretation of the height of ambivalence used to be “your mother-in-law going over a cliff in your brand new BMW.” However, since I’ve been arranging funding for all staffing sectors over the past 20 years, my interpretation of ambivalence has changed to discovering that hot niche and not having the proper capitalization to propel it in an exponential manner.
Initially, nothing is more exciting than finding that timely medical, IT or legal staffing niche. These are all skills in great demand by the end user and command substantial bill rates, enjoy continuous growth and are nearly recession proof.
In light of this, nothing could be more frustrating than being unable to build your business in your chosen sector exponentially. This is a challenge a majority of growing staffing firms are experiencing because they do not have adequate capitalization to continue their rapid growth. Consequently, they are faced with another challenge, which is enlarging their valuable equity. The aim of every entrepreneur is to build their equity in order to sell their business one day at the highest possible multiple. There is a direct correlation between the adequate capitalization you secure for your business and the multiple you will ultimately be able to secure at the time of your exit.
With these challenges in mind, it’s imperative that you give the highest priority to securing the highest available credit line in anticipation of supporting the continuous and unhindered growth of your staffing service. Being unable to do the optimal amount of business because you lack adequate capitalization is inexcusable in today’s staffing arena.
The chore is to identify the real funding specialist who knows the intense capitalization requirements of an expanding staffing service and has the ability to properly interpret the financials of that service.
The following are the vital points to assist you in your decision making process to locate the financing source that meets your particular needs:
- An ample credit line – agreed upon in advance that is large enough to enable the entrepreneur to expand their business by at least 50 percent.
- Flexibility – all banks and most financing companies work with pre-defined formulas that must be strictly adhered to. In the event you fail to meet all their requirements, you are deemed “out of formula”. When this occurs, all bets are off as to the relationship moving forward. The penalties you would face vary from an increase in rates, a lowering of your credit line or working in a default relationship. Avoid these situations by having the formulas and penalties stipulated in writing at the outset.
- Pricing – Being listed as No. 3 doesn’t negate the importance of this factor. It is very important that you don’t short-change yourself and your organization with ‘cheap’ but inadequate funding.
Whether you partner with a bank, an assets-based lender, a factoring company or staffing industry funding company, make sure that you negotiate a strong initial agreement with the funding source that you or your financial advisor choose. This could conceivably prevent the hindrances that threaten to impede your exponential growth at the most inconvenient time in your company’s development.