Factoring for Staffing Companies

factoring for staffing company
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Staffing companies these days fulfill a vital role in our economy. The stats are clear on this. These staffing companies employ 11 million people per year, and they occupy just about all the jobs across all industries. Staffing companies offer benefits to employers, employees, and to the economy as a whole.

Employers benefit because they don’t have to undergo the hassle of hiring competent workers, as the staffing company has done this job for them already. They can get as many workers as needed, and it’s less of a hassle when they need to let go of workers they don’t need any more. And if they find a great worker, the employers can just simply offer them a permanent contract.

Employees also benefit from staffing companies because they get employment that they may otherwise not get. And staffing companies find the employers for them, so they don’t have to scurry around looking for work.

But despite the many good things staffing companies offer, they may also experience problems along the way.

Why Do Staffing Companies Have Problems?

The problem that many successful staffing companies have is that they may not have enough cash flow to handle the payroll. More and more companies these days are looking to staffing companies to provide for their manpower needs. That means staffing companies have to spend money looking for the appropriate candidates, and they also have to meet payroll requirements.

But clients who make use of staffing companies don’t pay on the dot. Usually, they pay 30 days or so after being billed. This delay is causing a lot of headaches for staffing companies. Some have even been forced to not accept new requests for manpower because they don’t the cash flow to recruit and pay for new workers.

How Factoring Helps Staffing Companies

This is where factoring comes in. In factoring, the staffing company may be able to get as much as 80% of the value of the accounts receivable immediately. That money can then be put to good use hiring workers to fill some urgent slots. There’s no need to not accept any new requests anymore.

When the company which needed the extra workers then pays the bill in full, the factoring company forwards the rest of the amount to the staffing company, minus the fees they charge.

This method is in many ways superior to asking a bank for a loan:

  • Banks don’t always grant approval for loans, while factors have much higher approval rates. That’s because factors don’t care how good the credit of the staffing company is. What’s important is the paying history of the company that used the temporary staff.
  • Banks take a very long time to grant approval, but factors may take as little as a single day to decide to grant approval.
  • Factors take over the collection duties, so staffing companies don’t have to set up an entire department for this purpose.
  • Factors don’t interfere with how a staffing company uses the advance. Banks, on the other hand, want to know how the money will be used.
  • Factoring doesn’t count as a loan. It’s a cash advance, technically speaking, because the staffing company is using its own money instead of the lender’s money.

So if you’re running a staffing company, think about getting factoring services if the demand for your workers is making it difficult for you to meet payroll on time.

 

Published by

Chris Lanchech

Hi everyone, my name is Chris and I am a junior analyst at Neebo Capital and an inspiring blogger. We enjoy speaking with business owners and entrepreneurs who come to Neebo Capital looking for cash flow solutions. Give us a call toll free at 1-888-382-3766 or Visit us online at www.neebocapital.com

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