5 Benefits of Using Factoring for Your Temp Agency's FinancesPosted by Factor Funding Co. on November 6, 2014
Temporary employment agencies are vital in today's economy. As more people struggle to find jobs, your temp agency provides vital services that help out-of-work individuals earn paychecks until they can find permanent positions. As important as your role as a temp agency owner is, however, it does not allay your worries about how you will keep your business funded and functional. You can avoid money crunches, build your agency and maintain your role in helping people find jobs by utilizing these key advantages of factoring.
Coverage for Everyday Expenses
As a business owner, one of your primary duties involves paying your agency's everyday bills. You must cover the rent or mortgage, your building's utilities and water bill, the insurance and other expenses that are vital to keeping your agency open and running.
However, if you relegate your finances to being dependent on your clients' future payments, you may have to delay covering these essential bills. When you want to stay current on these regular obligations without falling behind or facing utility shut-offs, you can use factoring to pay for the everyday expenses that come with running your temp agency.
Business Expansion and Advertising
Your future success as a temp agency owner may depend on how many new contracts you can attract, as well as how many current clients you can retain. Addressing both of these concerns takes money that you may not have in your bank account, however.
When you want money to advertise, accept new contracts and build a business that will endure well into the future, you can use factoring to gain the finances that you need for these purposes. Rather than wait for clients to pay you, you can have the cash in hand now to grow your business as you see fit.
Immediate Access to Money
Your clients understandably will not pay you until the temp workers have fulfilled their employment obligations to the businesses that retain your agency's services. Even then, it may be weeks before you actually receive payment from these clients.
Because you cannot wait for a month or longer to receive payment, especially when it comes to keeping your business afloat, you can get payment sooner when you factor your invoices. Within 24 hours, you could have as much as 90 percent your invoice totals, giving you the money that you need today without having to wait for your clients to pay you several weeks into the future.
No Credit Check or Loan Qualification
You may well appreciate the efforts you must undertake to qualify for a small business loan from your bank. You must meet the credit and financial criteria first and still risk being turned down because of the recent financial climate.
However, with factoring you bypass the credit and financial scrutiny that comes with applying for loans. The credit and payment history of your clients come under examination, relieving you of the stress of fitting a bank's criteria and being turned down for financing that you need today.
No Long-Term Obligations
Another impediment that comes with securing a bank loan is the long-term commitment that you must endure until the loan is paid off in full. When you factor your invoices, however, you avoid a long-term relationship or burdensome payment obligations. Once the client has paid the invoices, you essentially are free to exit the factor relationship or enter into a new factor agreement if you need additional money in the coming weeks and months.
You also avoid financially burdensome monthly payments that come with a bank loan. Regardless of your financial situation, the bank will expect you to make payments or risk defaulting on the loan and facing collection efforts. With factoring, you do not have monthly payments. You can sell your clients' invoices, get money that you need right now, and focus on building your temp agency to serve your present and future clients.
Temp agencies often face unique money challenges. When you need money today, but cannot wait for clients to render payment to you, you may wonder what options you have to cover your pressing financial obligations. When you utilize factoring for your temp agency business, you can enjoy these notable benefits of this agreement.