Outside of the banking world, there are companies that specifically work with commercial businesses to provide money when it is necessary. In addition to these resources, payroll funding companies for the staffing industry will offer services such as term loans, front-and-back office solutions, traditional factoring term loans, acquisition funding and workers compensation captive insurance. To gain an understanding of how this works, staffing accounts receivable financing businesses are defined below.
When you own a temporary staffing company, one of the primarily problems you have with your pretax cash-flow is getting your invoices paid. Some clients will take up to four 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 new businesses is accessing a commercial business that does a form of financing called factoring. Once the paperwork is filled out, a staffing financing company gives an invoice-holder a large percentage of an unpaid invoice total.
When you manufacture a product or create a bill for services, you produce an invoice for your client. Nonetheless, when they do not pay, this can cause serious cash flow issues for your company. Instead of sitting on the invoice and waiting for it to get paid, you can take this invoice and turn it into cash. Providing this cash for an invoice is a financing receivables staffing industry company. They will give a business money upfront for their invoices, and keep a small percentage for performing the service.
For example, some financing receivables companies only charge three percent. This means that you will get $97 for every $100 on your invoice. Once you complete the transaction with the financing receivables company, you can pay your staff, and do not need to worry about your invoice being fulfilled.
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.
Obviously, the primary reason you will want to use factoring services for your business pertains to the collateral being used. Primarily, a bank will require that you use property as collateral, and places the risk on the business owner. On the other hand, staffing financing receivables 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 for temporary staffing agencies are: