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It's not uncommon for me to get an unreasonable request from a prospective client every day of the week. Last Monday was no exception. A staffing company owner, strapped for cash and worried about making payroll by the end of last week, told me last Monday that if I couldn't advance his staffing company any funds against last week's billings by this Friday, he would be out of business by today.
Ordinarily, I dismiss such gloom and doom predictions as the ravings of a guy under a lot of pressure. I explained that ordinarily, I can advance funds in as few as three to five business days, but that I couldn't make any promises until I got further into the deal. But this prospective client wasn't having any of it. He needed a commitment—and fast.
Apparently, his temporary staffing firm had grown so quickly over the past several months; an unexpectedly large placement of temporaries with one of its largest clients strained its internal capital resources to the breaking point. Indeed, when I did a quick review of his Invoice Aging Report and his projected immediate cash needs, it was plainly evident that unless I could get this guy funded within the week, his temporaries would go without pay and he would likely be out of business.
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Luckily, this staffing firm had only three major accounts and they all had good credit. Also, the owner informed me that his receivables were free and clear of any liens. Both of these facts worked in his favor, and reluctantly, I promised funding by that Friday so that he could cover his payroll. Here's how last week went:
February 7, 2005
I immediately sent a factoring proposal via e-mail to the prospective client. I gave him instructions that if he liked the proposal to accept it by replying to the e-mail and by submitting an application on line through our web site. I told him that if I received the application the same day (Monday), I would have time to have my assistant overnight a set of documents to him.
Late on Monday afternoon, I received the application via e-mail. I sent him our standard documents overnight and e-mailed a copy of our Factoring Agreement to him, so that he would already be familiar with the document by the time the Fed Ex packet arrived
By Tuesday afternoon, I had conducted a “tele-closing” (an explanation of all our documents with instructions on where to sign each one) and an orientation in which I described the factoring process in detail. I also did a demonstration of our on-line services including a demonstration on how to submit credit approvals on line and how to access our reports on line.
I also had my support staff perform a lien search to ensure that the staffing firm's accounts receivable were unencumbered. In the mean time, I had requested an updated copy of the staffing firm's Invoice Aging Report, Articles of Incorporation, and Proof of Liability and Worker's Comp. insurance coverage.
On Wednesday morning, I received the results of our lien search from the Secretary of State and luckily, it was clear. You never know when an unexpected surprise may show up on a lien search only to slow down the process. Also on Wednesday, I received a Federal Express package from the client that contained that week's billings. Enclosed in the package was a dozen or so invoices (printed the day before), together with the corresponding time sheets signed by the supervisors for the previous week's work performed by the temporaries.
Now, all I had to do was to confirm the outstanding balances reported on his aging report with his customer's figures to make sure that his report was accurate. For this, I enlisted one of our best collection professionals who was able to quickly find the Accounts Payable personnel who had this information at their finger tips.
Once we confirmed the accuracy of the information contained on the client's Invoice Aging Report, we notified the Accounts Payable personnel that the payments had been assigned to us and to begin remitting payments to us until notified otherwise.
On Thursday morning, we wired 90% of the invoice amount to our client, mailed his invoices to his customers and chalked up another victory.
Secure in the knowledge that his payroll checks would clear his bank, and that with our help, cash flow was no longer a concern, he began spending time on more profitable endeavors, like expanding his business and increasing revenues.
Staff Member, 1st Commercial Credit
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