There are many types of IT staffing firms. Some technology staffing firms provide temporary personnel for companies involved in short term projects. They don’t want to hire a permanent worker because after the project is completed they won’t need that particular worker anymore.
Other tech companies find that some jobs simply have high turnover. They need tech staffing firms to make sure that they always have someone reliable in that position.
Then there are IT staffing firms which act as recruiters for tech companies. They don’t get paid until the people they recruit are hired. Some tech companies don’t want to deal with the pre-hiring costs, and they use tech staffing companies to find or train good people.
All these types of firms will need lots of working capital in order to operate effectively. Since banks are not always reliable sources of business loans—they take too long, they need lots of collateral, and they don’t often approve of loans in the end—invoice factoring for technology staffing firms has become very popular.
How Factoring Works
Invoice factoring for technology staffing firms is very simple. As a staffing firm, you provide workers for tech companies. You have an invoice for this service, and you sell these invoices to a factor. The factor gives you 70% to 85% of the value of the invoice, so that you don’t have to wait 30 days to get most of your money. You only have to wait 30 days for the rest of the payment. When the customer pays in full, the factor gets back the money they advance to you and then they take their cut. You then get the rest of the payment.
The Difficulties for Tech Staffing Firms
There are many reasons why tech staffing firms are always in need of working capital.
- Many IT people who work for staffing firms are actually looking for permanent jobs. This is natural, since on average a permanent worker earns considerably more than a worker for a staffing firm. They can work for a tech company for a while even as the company sees if they are a good fit. If that’s the case, they make an offer for the worker so that they leave the staffing firm.
- This means that staffing firms are always looking for new talent.
- It’s hard to find new talent, because the best in the field know that they are in such high demand among tech companies. Usually, a good tech worker is already employed, and getting them to work for a staffing company can be hard.
- To entice some IT workers, staffing firms may offer more reasonable wages and they may want to look for more “exciting” jobs, such as working for a video game company or for a Hollywood firm. All these efforts will cost money.
- You need to make sure that you have topnotch recruiters. These are the people who approach IT talent, and they need to have the ability to convince talented people to work on a per project basis.
- With invoice factoring for technology staffing firms, you can make sure that your recruiters and the people they recruit are all paid well so they will want to work for you.