Financing Options to Help Your Staffing Agency

480254475Are you looking for a way to fund your payroll? When you do not have the money to pay your staff, you may think that traditional lines of credit from the bank are your only option. However, there are payroll funding alternatives that are focused on financing your receivables and similar forms of collateral. Outside of the traditional banking world, there are companies that specifically work with businesses to provide money when it is needed.

Why choose staffing accounts receivable financing? When you own a  staffing company, one of the primarily problems you have with cash-flow is getting your invoices paid. Some clients will take up to two months, or longer, to pay you for services. While you are waiting for the money, you cannot accomplish all of your goals to grow your business. Instead of taking out a loan from the bank against your property, a more effective solution for many small businesses is partnering with a business that does a form of financing called receivable factoring. Once the quick application process is completed, a factoring company gives an invoice-holder 90% of an unpaid invoice total up front for working capital.

Using your invoices as collateral. When you create an invoice for temporary employment services rendered, it becomes eligible for financing. Nonetheless, when they do not pay within the terms, this can cause serious cash flow issues for your company. Instead waiting for it to get paid, you can use this invoice and turn it into immediate cash. Providing this cash for an invoice is a method used widely in the staffing industry. Factoring companies will give a business money upfront for their outstanding invoices within 24 hours, and once it is paid they will keep a small percentage for paid invoice.

PREMIUM CONTENT: Q1 gross margins for public staffing firms

How accounts receivable financing works. Factoring arrangements for temporary staffing companies differ from loans and lines of credit because they involve the discounted sale of outstanding invoices to a financial institution in return for immediate cash disbursements. Invoice loans and lines of credit, by contrast, use accounts receivable as collateral to secure these financing arrangements. Approvals are generally based on the creditworthiness of the client businesses rather than on the credit history or financials of the staffing company. This alternative approach allows temporary staffing agencies to obtain financing even if traditional lenders have turned them down in the past.

Lines of credit of more than $500,000. When you have a large business and need to gain quick access to hundreds of thousands of dollars, factoring companies are a timesaving solution. A line of credit can be established that will remind you of working with a traditional bank. The main difference is that a factoring company can set this up much more quickly than a bank. As long as your company remains solvent, you will be able to access payroll funding and lines of credit based on the value of your receivables.

Benefits of invoice lending
. The receivable factoring application process generally requires significantly less paperwork than traditional lending arrangements. Funding decisions can be completed in as little as one business day; disbursement of proceeds typically can be made within a week of approval. This streamlined approach can put cash in the hands of staffing company owners and administrators more quickly, allowing them to manage salary obligations and ongoing overhead expenses in a timely manner.

Additionally, a bank will require that you use property as collateral, and places the risk on the business owner. On the other hand, factoring companies use invoices as collateral. In many cases, these lines of credit are also extended much more quickly than a bank.

Other benefits of these types of factoring services are:

  • Building your company’s credit
  • Ability to offer credit terms to customers
  • No principle payments on a bank loan
  • Continuous credit checks available
  • Quick under restricted cash-flow
  • Ability to offer financing to new companies and start-ups
  • Bad credit on owners is usually not an issue

MORE: Staffing firms need flexible funding for stability and growth

Raul Esqueda

Raul Esqueda
Raul Esqueda is president of 1st Commercial Credit.

Raul Esqueda

Share This Post

Tweet

Related Articles

One Response to “Financing Options to Help Your Staffing Agency”

  1. […] Are you looking for a way to fund your payroll? When you do not have the money to pay your staff, you may think that traditional lines of credit from the bank are your only option. However, there are payroll funding alternatives that are focused on financing your receivables and similar forms of collateral.  […]

Powered by staffingindustry.com ·