Cash flow problems can be one of the most familiar problems for a lot of temporary employment agencies. And a solution that businesses often resort to is the use of temporary employment agencies factoring. Sure you have lots of clients whose companies are financially capable and are good with credit. But the thing is, these companies are slow on payments due to maybe a longer billing cycle or probably because of some sort of corporate red tape; but that of course is outside your concern.
On the other hand, while you are waiting for your receivables to fully liquidate, you have to make your own payments to your staff and suppliers. This is where the equation gets all muddled up. You have money that you have yet to collect, but you have dues now that you have to settle. So where do you get your money to cover your current dues?
Temporary Employment Agencies Factoring: Quick Cash for Dire Needs
Generating cash for your business is not easy. Sure, there are lots of ways to do so, but not all of those ways are applicable to your business. An option to get some funding is to take out a traditional loan; however, if you are a newbie in the business, you may not yet qualify for this kind of loans. But the good news is, it doesn’t end with traditional financing. Instead you may opt to go to a lender or a factor.
They offer short term solutions to companies suffering from financial constraints by buying accounts receivables. However, they’ll buy it at a rate that’s lower than the actual amount of the invoices. On the upside, it will give you some instant funding that can help make you pay your current dues as a temporary employment agency.
Is Factoring the Right Financing Option for Temporary Employment Agencies?
Temp agencies have lots of expenses that cannot be put off; so it is of utmost importance that they have a steady influx of funds. For a temp agency to run, it needs to pay for advertising, utilities and more so, it needs to make prompt payments to their employees. So for immediate funding needs, taking out a business loan the traditional way is not going to be a practical option, since approval for this kind of loan takes too long. That is why factoring is the ideal choice for businesses such as temporary employment agencies.
Lenders or factors also do not require a company to put up a whole array of hard assets to be used as collateral. Oftentimes, they only require the invoices that borrowers want to sell plus probably the employees’ corresponding timesheets. If they get approved for invoice factoring, the lender will deposit the funds into the company’s bank account and will soon be made available to fund the company’s monthly obligations. Temporary employment agencies factoring allows the company to pay their dues to its billers and employees without having to take out a new loan.
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