Staffing companies provide skilled workers to established businesses making them one of the most valuable sectors. However, these companies are often the last to be paid which means that company owners may have to find a way to increase cash flow in between invoices. Staffing factoring is a simple financing solution that many staffing agencies can use to fund their business needs. If you're in the staffing business, learning how staffing factoring works can help you get cash for business right away.
An Overview of Staffing Factoring
Invoice factoring is basically just an advance against the value of your outstanding invoices. Instead of applying for a traditional loan at a bank you can simply submit your invoice to a factoring company to receive a cash advance based on the value of the invoice. In effect, you are receiving most of the payment from your client earlier than you normally would which helps you cover immediate expenses.
How the Process Works
To open a factoring arrangement you must have creditworthy clients with a good payment history. Since factoring is not a loan your customers' payment records serve as your credit. If your application is approved you'll send the factoring company your invoice. The company will then send you most of the invoice value as a lump sum payment. Once you get the money you can use it however you need to. The factoring company takes over the responsibility of collecting on the invoice. When your customer pays off the invoice in full the factoring company subtracts its fee from the balance and sends you the remainder. These fees may vary according to the company so you may want to inquire at several firms before settling on one.
Why Use Staffing Factoring
There are many reasons to use staffing factoring for your business. Factoring does not require you to pass a credit check and it doesn't require you to have demonstrated a profitable business history. Since many banks require these conditions for business loans many small companies have been unable to qualify for lending. Factoring also helps you to get your money much faster than traditional collections. Most factoring companies can get your advance to you in a few business days. Staffing factoring also reduces the need for you to perform accounts receivable duties. Since the factoring company assumes the collections responsibility you'll be free to concentrate on other areas of your business.
If your staffing agency is struggling with business expenses while waiting on invoices to be paid staffing factoring may help you make ends meet. Taking the time to inquire about any service fees can save you money on this arrangement.