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How Temporary Staffing Agencies Finance Business Operations

During the February and March of first quarter of 2013, temporary employment in the U.S. increased by 22,000 and 20,300 jobs respectively, according to the Bureau of Labor Statistics. Since then, the economy has been sending mixed signals about continued growth in temporary help services. While weekly tracking appears to show an increase, the numbers in July made an insignificant impact on employment with just over 8,000 temporary jobs added.

The ebb and flow of temporary staffing agencies is not news to those in the staffing industry. The demand for services can rise as quickly as it falls based on geographical locations and company needs. However, this nature does not change the needs of temporary agencies to remain open and prepared to handle an influx of business.

A healthy cash flow is necessary to fund payroll and quickly find candidates to fill positions. When demand falls, agencies still need working capital to continue operations and prepare for the rebound.

One of the strongest selling points of temporary staffing agencies is the cost of advertising for job candidates. Generally, temporary staffing agencies will advertise open positions. They also review resumes and interview applicants. Agencies are responsible for the upfront costs of these efforts. Clients are billed after applicants are hired and work for clients.

Naturally, this creates a gap in cash flow until clients decide to pay the invoices. In the meantime, staffing agencies have to make payroll, purchase supplies, pay utility bills and meet other expenses associated with keeping the doors open. This can severely restrict the cash flow of temporary staffing agencies for business operational expenses. Planning for growth and expansion might get placed on the back burner unless enough funding is secured.

Whether you are starting a new staffing agency or looking to expand an existing one, a gap in cash flow is not something that you can afford. To shore up financial leverage, consider alternative financing options for payroll, growth and business operations.

Three Popular Financing Sources for Temporary Staffing Agencies

There are many ways to fund payroll and growth opportunities for temporary staffing agencies. Below is a brief summary of some of the more popular sources.

Line of Credit

With good business credit and a successful track record, your staffing agency may have enough collateral for a line of credit. This traditional source of business financing can be used to fund payroll as demand for services fluctuate. A quick search online can provide a list of lenders that cater to the temporary staffing industry.

Even if you are just starting a staffing agency, a strong line of credit can support building a talent pool as you market services to viable clients.

Nontraditional Lenders

In some areas, traditional lenders might hesitate in providing a line of credit or other forms of financing to a new company. Many want you to have experience and a positive track record. But how can you build a track record with halted resources? One source to consider is applying to banks or lenders that will accept nontraditional collateral to secure a loan. Research what is available and make sure the lending terms are something that you can handle.

Asset-Based Factoring

Financing by using an asset-based factoring service is another lending option to consider. Companies that provide short-term loans based on invoices and anticipated earnings can help your cash flow as the business continues to grow. These companies specialize in helping businesses that cannot afford to wait for months to get paid by clients.

You can take proactive measures to position your temporary staffing agency for present business operations and future growth. Match the funding source with business needs and your doors can remain open for the next wave of hiring.