Why Factoring is a Great Source of Staffing Agency Funding

Technically speaking, there are several ways of obtaining staffing agency funding. You can approach a bank and apply for a loan or line of credit. You may sell shares of your company to a venture capitalist in exchange for some capital. Some are even tempted into use their credit cards to pay for expenses necessary to run a staffing agency.

However, many agencies have discovered the many benefits of factoring staffing accounts receivable. In factoring, you don’t have to wait for your clients to pay you in full in 30 or 60 days. Instead, you get about 75 to 85 percent of the value of the invoice at once from the factoring companies, and you can use this money to pay your workers and hire new ones.

So what makes factoring such an advantageous option? Here are some of its very beneficial features:

You Can Get Your Funding Even With Bad Credit

It’s not very easy to get a loan from a bank, even at the best of times. And if you’re familiar with banks these days, you know that it’s never the best of times. And so if your staffing agency is new or has bad credit, getting the funding can be virtually impossible.

That’s not the case when you approach a factoring company. These factors don’t really give a damn as to what your credit score is. They’re much more concerned with the credit worthiness of your customers. When the factor advances you the money, your customers are instructed to pay the factor directly, so it makes sense that the factor wants your clients to have a good history of paying their bills in full and on time.

You Don’t Need Collateral

When you obtain a loan from a bank, in most cases you’re going to be asked to put up property as collateral to secure the loan. Since you’re running a staffing agency, your company doesn’t have a lot in the way of heavy or expensive equipment. So as the owner you may have to put up your own home as collateral.

In factoring, there’s no need for this sort of thing. You don’t need to put up your corporate assets and your personal assets are untouched. The factors only need a lien on your accounts receivable. That’s it.

You Can Scale Your Funding

You have lots of leeway regarding how much advance money you get so that you can boost your readily available working capital. In a way, it’s like having a line of credit or using a credit card. You can only take as much money as you need. If you don’t need much, you can just submit several invoices instead of all of them.

But lines of credit and credit cards have limits imposed by the lender. With factoring, the limits are only defined by the volume of your sales. So the more successful you become, the more advance money you can have available for your staffing agency.

So if you’re in need of staffing agency funding, think about factoring. It may be the key for the growth of your staffing agency.


How to Smartly Use Staffing Company Cash from Factoring

When you start your own staffing company, your startup capital is spent first on office rent and supplies, recruitment and advertising so you can get customers. But when your company begins to attract a fair amount of clients, you’ll need to grow and for that you need more staffing company cash.

While you may try to get a loan from staffing direct lenders, you may also want to try factoring instead. Your clients often pay you for your workers’ services in 30 or even 60 days, but with factoring you can get that payment (or at least 70-80% of its value) from the factor in advance.

So how should you use your available working capital? Here are some ideas:

  • Improve your website. A website for your staffing agency is one of the most convenient tools at your disposal. It serves as an advertisement for your customers so that they know what kind of personnel you’re offering and at what rates. Here you can list down all the services you can perform for your clients.

It also serves as a recruitment tool for potential workers as well. You may not even need to have your potential applicants come in to your office. Instead, they can take a few tests online to see if they have the skills you’re looking for. If they pass, your website has your address and contact information so that they can come in to your office.

  • Hire new workers. If your staffing agency is attracting more clients, you may need more workers to meet the demand. That means lots of additional expenses. Not only do you have to meet your increased payroll, but you will also need to get insurance for all your new workers. And then you also need new supplies, such as time cards, orientation material, or workplace supplies such as uniforms.

Recruitment may not always be easy, and to attract more applicants you may have to advertise for workers more extensively. You may also need to grant bonuses for referrals.

  • More training for workers. Even if you carefully screen your workers for their skills, you may need to provide more training for them. New workers will have to be taught about how you want things done, because their performance will reflect the professionalism and productivity of your staffing company. You’ll want to make sure that they are courteous as well as knowledgeable about their tasks.

You may also want to provide additional training for current workers. For example, if you’re running a janitorial service you may want to teach some of your workers how to clean carpets properly.

If you’re running a car repair service, you may want to make sure that your workers are all familiar with all the new technology that cars have every year. At the same time, you may want to teach younger mechanics about how classic cars and antiques should be handled.

As the owner of a staffing agency, you’ll find that you’ll always need more staffing company cash. Luckily for you, you can get needed capital from factoring companies if banks won’t grant you a loan.

How to Use Factoring to Get More Business

A lot has changed in the business landscape in the last 10 years, and analysists have reported that invoice factoring and cash advance sectors are increasing in popularity and momentum, growing at a double-digit rate each year. The market for factoring, wherein businesses take out a cash advance against their invoices, is even greater with Morgan Stanley stating the industry makes as much as $15B per year.

Why Factoring for Small Business is a Practical Option

With such a significant rise in popularity, one would have to wonder what makes cash advance services very attractive to small business owners. The reason for this phenomenon is not actually hard to comprehend. First of all, factoring is so much easier to obtain compared to bank loans. Banks usually check the length of history of the business, the amount of collateral needed and the payment terms of the loan, and many small businesses have not been around long enough to meet their criteria.

In addition, most traditional sources can only help borrowers who want to apply for long term loans (ie. 5 to 10 years). If you need credit and want to pay it off within 3 months to 3 years, banks usually won’t be able to help you.

How Factoring Works

There are many factoring companies online right now and they follow the same basic principle. If a business is having difficulty meeting cash flow, they can turn to a factoring service to get a cash advance so that they can continue their daily operations and even fund their expansion.

Factoring companies are very useful when it comes to short term cash advances and they provide “loans” of as much as 90% of the amount in the invoice. These alternative lenders, in turn, charge a “fee” for the service, usually a percentage of the invoice in addition to collection and management fees, if applicable.

When to Turn to Factoring

One important thing about factoring that a business needs to understand is that it’s not cheap at all but it’s also no more expensive than taking out a credit card cash advance. In fact, it’s probably cheaper and it also gives you the added benefit of not having to collect payments from your clients. Some factors even save you the hassle of doing credit checks on your clients because they can do it for you as part of their service.

But to ensure that you choose a trustworthy and honest factoring service, you have to take some precautionary measures.

  1. Choose a factoring service that really understands your business. Do business with one that has a high level of understanding of how your business works and the processes you employ so you can stand to benefit most from the partnership.
  2. Pick a funding partner with a consistent and guaranteed source of capital.
  3. Examine the terms of the transaction. Check the interest rate and fees and compare the numbers with what other funding providers are offering.
  4. Get a copy of the contract and read it in advance (before signing on the dotted line).
  5. Scrutinize the management team, find out how long the company has been around, and ask for customer references.

Factoring as a financing option for a startup business has proven to be very useful not only to keep the company afloat but also to help them grow. With a steady cash flow, there’s nothing that will stop you from increasing your revenue and taking advantage of every opportunity you can get to make more money.

Small Business Farm Microloans

Farming is not exactly the rage in the US these days. Out of more than 313 million people in the country, less than 1% of them are farmers. And of these farmers, less than half claim it as a principal occupation.

Yet despite the dwindling number of farmers, it’s an undeniable fact that the efficiency of the American farmer is still impressive. US farmers are still among the best in the world. For proof, consider that 3 million farmers are responsible for exporting $115 billion worth of agricultural products all over the world.

The Challenges Faced by Farmers in the US

Today, it’s not really all that easy to be a farmer. Challenges faced by farmers all the time include climate change, the inadequacy of current soil and water conservation, the abuse of pesticides, and genetic modification.

There’s also the fact that farming is not a popular industry among the youth. The average age of a principal farm operator was 54 years old back in 1997. By 2007, that age increased to 57 years old.

Finally, there’s also the matter of economics. The average expenses incurred by farm production is $109,359 a year. Meanwhile, less than 25% of all farms in the US generate revenues of more than $50,000.

The Perseverance of US Farmers

All these challenges have not deterred most farmers from continuing in their efforts to become viable farms. But often they need more capital to take full advantage of the opportunities they encounter. However, financing is often difficult to come by. Some farmers are just beginning in their farming endeavor, so they may not have the necessary credit or collateral to secure the loan they need.

This is where small business farm microloans come in.

The Advantage of Farm Microloans

These microloans are extremely convenient for many farmers to make their business more efficient. These loans are comparatively easier to get. The application process usually takes less time than a traditional loan to process, and the needed paperwork is significantly reduced.

The maximum amount you can get as a small business farmer is $50,000 which is an improvement from the previous $35,000 limit. There is no minimum amount for the loan and you can use the money to:

  • Buy livestock such as chickens and pigs, and the feed for them as well
  • Get much needed farm equipment such as tractors
  • Cover operational costs such as fuel, farm chemicals, and insurance, along with family living expenses
  • Make minor improvements or repairs to farm structures and buildings
  • Refinance some particular debts related to farming
  • Hire management and leadership roles not directly related to farming, such as a marketing director

Limitations of the Farm Microloans

Microloans often require shorter repayment periods, and farming microloans are no exception. The loans must be full repaid within 7 years.

In addition, the loan cannot be used to finance non-farm operations, and that includes horses for non-farm purposes (racing or for pleasure, for example), dog raising, tropical fish, earthworms, and exotic birds.

Still, even with these limitations, the availability of microloans can help new and struggling farmers. These people need all the help they can get to make enough money to support their business. Fortunately with farm microloans, they can.


The Challenges of Small Business Lending

Running a small business is often regarded as a challenge and small business loans can help business owners overcome difficulties along the way. But ironically, applying for a business loan is also a challenge in itself. So instead of having a quick infusion of cash to solve your urgent problems, by applying for a loan, you may encounter even more problems than you already have.

So what are the challenges in small business lending?

  1. Large banks have lousy approval rates. According to the latest figures for small business loans, the approval rate in big banks is only a paltry 4%, even if that rate is still 20% higher than in 2013. That just proves the point that about 80% of small business loan applications are rejected and yet that’s already much better than in the past.
  2. Small banks are disappearing. Meanwhile, in October 2013 the approval rate for small business loans in smaller banks is at a comparatively healthy 50.2%. While this sounds good, the problem is that smaller banks are disappearing from the financial landscape.

Over the last 20 years, regional and local banks with deeper ties to the community have been taken over by foreign banks and large national banks who don’t actually care as much about the community as for their profit margins.

  1. Bank loans take up too much time and effort. The entire application process can take weeks, and during that time the business may already be up in flames because of the lack of much needed cash.

According to one study, on average a small business owner needs to approach numerous banks and use up three full days of man-hours to fill out applications, and that’s before they find a bank who will agree to lend them money.

  1. Banks don’t find small business loans as profitable as larger corporate loans. The banks find these loans much more labor intensive, and that cuts down on their profits. Simply put, a bank usually finds that lending a million dollars is more profitable and easier than lending $50K.
  2. Banks have rather stringent loan requirements. The US may be past the worst of the recession, but banks have a pretty good memory and they no longer have a taste for risky loans. The problem with small business loans from the banks’ perspective is that these companies are intimately tied to the health of the economy.

A large company can weather a financial storm more easily. But a small business may not be as sturdy, and another financial downturn can cause many small businesses to fold up and unable to pay their debts.

So nowadays, if you need a bank loan you better make sure you have excellent credit, a very stable business, and some collateral for the loan. And you should be able to wait several weeks before you will get your money. That is, if you get your money.

For all these reasons, alternative funding institutions offering factoring services and merchant cash advances have become more viable sources of funding than ever before.

The Appeal of Government Purchase Order Funding

Landing a purchase order from the government is one way of growing your business. You have a customer that will surely pay you
Landing a purchase order from the government is one way of growing your business. You have a customer that will surely pay you

If you’re running your own company, you’re usually required to put up some of your assets as security when applying for a bank loan. The security gives the bank peace of mind, because the collateral acts as an alternative form of payment if you’re unable to pay back the loan.

But you may have other assets you can use to secure additional funding. If you’re having cash flow problems, you may find yourself having to walk away from a lucrative government contract simply because you don’t have the capital to pay for supplies necessary to fulfill the contract. But with purchase order funding, the purchase order itself is enough to get you the funding you need.

Here are some reasons why a government purchase order can easily be used to obtain funding:

  • Approval for purchase order funding depends on the ability of the customer to make payments. And that’s why government purchase orders are so attractive. Lenders know for a fact that the government will pay up. There is virtually no chance at all that the customer will declare bankruptcy and become unable to pay.
  • Government purchase order funding provides greater amounts of capital than purchase orders made by private companies. In purchase order funding, you get a percentage of the value of the purchase order in advance, which you use to pay suppliers so that you can fulfill the contract. The more reputable and secure the customer is, the higher the percentage of the funding.

And there’s nothing as secure and reputable as the government (in the US, at least). That’s why PO funding lenders can offer as much as 85% of the value of the purchase order. When the PO is issued by a private firm or by a lesser-known public firm, the funding may only be 50% of the value of the contract.

  • PO funders with experience dealing with the government can lend you their expertise. These funding institutions can even help you land a government contract in the first place. They also know how governments define certain terms in the purchase order, so you can be sure of what’s expected from you.
  • Purchase order funding providers can also help in dealing with payment collection later on through factoring. With factoring, you get an advance on the payment instead of having to wait for days for the government to pay up. You also have your funder bear the burden of collection the payment from the government. They’re the ones who have to deal with government red tape regarding payment collections, not you.

Landing a purchase order from the government is one way of growing your business. You have a customer that will surely pay you, and there’s also the prestige of landing a government contract which you can use to attract more business in the private sector.

And if you fulfill your obligations properly, you also increase your chances of getting more government contracts in the future. You’ve already proven yourself, and the government may be more likely to direct more business your way because you’ve already demonstrated a proven ability to fulfill orders promptly and efficiently.

What You Need To Know about Invoice Factoring in 24 Hours

Just about every small business owner knows that asking for a loan from a bank can be one of the most time-consuming processes ever known to man. The entire loan application is an excellent example of red tape nonsense. You have to submit the right documents, and then you have to wait days, weeks or even months. When you do hear from the bank, you may find that they only want more documents. It’s for this reason why invoice factoring in 24 hours seems so appealing.

A Standard Invoice Factoring Agreement

Part of the reason why invoice factoring is so popular these days is that it accelerates the collection process. Some businesses need money because most of their working capital is tied up in their accounts receivable. They deliver the product or the service for a client, but the client doesn’t pay cash on delivery. Instead, they promise to pay in 30 days, and sometimes the term is for 90 days. You have to wait for 3 months to get your money.

With invoice factoring, you don’t have to wait for long. This financing option isn’t actually a loan. It’s more like a sale of your invoices. You sell your invoice to the factor, and in return you get a percentage of the value of the invoice right away. So if one invoice is worth $10,000 you can get anywhere from 70% to 90% ($7,000 to $9,000) right away. You can then use that money for pressing needs, such as meet payroll or pay for utilities.

When your customer pays in full, you then get the rest of the payment, less the fees of the factor. You’ll need to pay the discount rate which is applied to the value of the invoice, as well as any fees for setting up the factoring line and for processing the invoice. In exchange, the factor often does the collecting for you.

Receiving the Advance Quickly

With some factors, you may have to wait for a few days in order to get your advance. The factor authenticates the invoice and also assesses it if it meets their standards. They may think that a particular customer of yours may be a poor risk, and they may not advance you the money at all.

But with some 24-hour invoicing service, you don’t even have to wait for a few days. In fact, you can get your advance in as little as 24 hours. If your needs are really pressing, then such speed can only be beneficial for your business. Some financial matters, such as payroll, can’t afford to be even a day late.

Immediate Factoring Approval

Sometimes, a factor may even claim they provide invoice factoring in 24 hours, meaning that your applications may be approved within 24 hours of calling and applying. For true emergencies, the impressive speed of this service can be truly helpful, and gives a very stark contrast to the slowness of bank loan application processing.

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The Need for Food and Beverage Industry Working Capital Line of Credit

The Need for Food and Beverage Industry Working Capital Line of Credit
The Need for Food and Beverage Industry Working Capital Line of Credit

The food and beverage industry these days are facing some financial challenges. Often, for a company to stay afloat, there is an urgent need for a food and beverage industry working capital line of credit.

What Will the Working Capital Be Used For?

There are several key issues that companies in this industry must address. These are the issues which the lender of the line of credit must also be familiar with.

  1. The business tends to be seasonal and cyclical. There are peaks and troughs in the business cycle, and this means that sometimes working capital can be problematic because the revenue stream is not as strong. Lenders should also be aware of this as this affects loan payments.
  2. The need for research and innovation. The consumer public is affected by trends, and often new technology can spark a new trend that can provide an advantage for a company over its competitors. This is another area where working capital is needed.
  3. Labor costs are increasing. This is another drain in the cash reserves of a company in the food and beverage industry, because it is difficult to pass on the costs to the consumer public.
  4. Commodity hedging. Companies in this industry are reliant on the commodities market for their pork, cattle, and orange juice supplies. A lender who can provide expert insight on the matter can be invaluable.
  5. Devaluating inventory. Some products such as cars and gadgets tend to lose value over time because of technological developments. They eventually become obsolete. But in the food and beverage industry, the inventory literally has an expiration date. Lenders must be aware of this reality, and they must be flexible in their terms.
  6. Capital expenditures. Here is where working capital is absolutely necessary. Equipment must be maintained and repaired if the operations of a company are to continue.

Where to Get the Working Capital

So how can you get a food and beverage industry working capital line of credit? There are several methods recommended by financial experts. One, of course, is by obtaining a line of credit from a bank. This approach, however, can take a long time and approval is not always likely. In addition, the requirements can be very difficult. You’ll need an excellent credit history, and your financial statements should demonstrate several years of profitable business. You’ll also need to put up collateral as security for the line of credit.

Another method that’s gaining ground is factoring. With this option, you sell your invoices to the finance company and in return you get something like 80% of the value in advance to cover your operational needs. When your customer pays the factor in full, you get the rest of the payment after the factor has taken out its fees. The advantage of this approach is that your credit history is irrelevant and you can submit just the invoices that can cover your working capital needs.

Either way, the need for a working capital line of credit is crucial for your company to survive.

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How Medical Accounts Receivable Financing Works

The healthcare industry provides one of the most important services that people need. If you run your own medical clinic, you have the privilege to care for people and restore them to good health. Unfortunately, in the healthcare industry, it takes an unbelievably longtime for you to actually get your fees from the insurance companies. And that’s why medical accounts receivable financing is so important—and all too common. Medical Accounts Receivable Financing

Obtaining Funding with Your Accounts Receivable

As every healthcare provider knows, Medicare, Medicaid, and private insurance companies take quite a bit of time to cough up the money to pay for your services. These institutions (especially insurance companies) are much more adept in receiving money from clients instead of paying out claims. This delay can truly have some terrible consequences for your clinic.

Accounts receivable financing is one way to solve this. Instead of waiting for an interminable amount of time to get your fees, the finance company can forward a percentage of the accounts receivable to you immediately. You can then get as much as 90% of the value of the invoice right away. The rest of the money will be sent to you by the finance provider once the insurance company has finally paid in full. The company takes a small percentage from that payment.

Advantages of Accounts Receivable Financing for Healthcare Providers

So why should you consider accounts receivable funding? There are several notable advantages:

  1. The application process is very easy and quick. You can get the financing you need even if you are just starting up your company. The approval rate for this kind of financing is much greater than getting a loan from a bank. Your credit doesn’t affect your chances of getting your money.
  2. This financing does not involve getting into debt. Thus, it doesn’t have any further effect on your credit rating.
  3. You can use the money for a lot of things for your clinic. You can use the money to cover your payroll. You can use the cash to hire more people or renovate your clinic. You can buy more equipment so that you can improve or expand the services you provide.
  4. You can use the finance company’s services as a way to solve many of your collection problems. You won’t have to hire personnel to deal with insurance companies to get your fees. Instead, the finance company can do that service for you. They have the skills and the experience for that sort of job.

So if you want to improve your amount of ready cash for whatever need you have for your clinic, a traditional bank loan may not be your best option. With medical accounts receivable financing, you can get exactly the amount of money you need by using your invoices as a means to get funding.


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