Career Employment Strategies

Thursday, April 12, 2007

How Factoring Companies Can Help Staffing Companies Grow

One of the biggest challenges for staffing company owners is meeting payroll. Employees must be paid every week – without exception. However, paying employees can be very difficult if an agency does not have predictable or reliable cash flow. What is worse, waiting for a payment from a slow paying client can seriously jeopardize the agency's ability to function.

This situation, unfortunately, is quite common in the staffing industry.

What is the solution? When owners or managers face slow cash flow their first instinct is to try and get business financing from their local bank. However, they soon learn that getting a business loan is very difficult. Most banks require that the owner have an extensive business history, spotless personal credit and substantial collateral. Unfortunately, small businesses seldom qualify for business loans.

Nevertheless, there is an alternative that can help you finance you staffing agency. It's easier to obtain than a business loan, can be set up in days and is available to most business owners. And, it provides staffing agencies predictable cash flow.

The solution is called invoice factoring. Factoring provides you with an advance on your invoices from slow paying clients. That advance – available soon after you invoice for your work – can be used to cover payroll and other expenses. In effect, factoring receivables provides you with predictable cash flow enabling you to better operate your staffing company.

How does invoice factoring work? Well, it's a simple solution. It works as follows:

1. You deliver a copy of the time sheet and invoice to the factoring company

2. The factoring company advances up to 90% of the invoice within 24 hours

3. Once the invoice by the customer the transaction is settled

Factoring fees can range from 1.5% to 4% per month and are based on your business volume and other criteria.

One of the most attractive features of factoring is that it is easy to obtain. Most staffing agencies will qualify provided that they do business with good customers and are free of problems. Factoring invoices is an ideal solution for both established and new companies and can help propel your business to the next level.

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