How Staffing Agencies Can Benefit from Factoring
Your cash flow and working capital determine whether you can pay your current liabilities. For staffing industries, these funds are used for marketing, payroll and other expenses. However, if your customers don’t pay their invoices quickly or you enter a slower season, your working capital can decrease to a dangerous level. These are ways factoring can help.
Increase the Consistency of Your Cash Flow
You need a steady cash flow to pay your bills, but at times, staffing demands fall. Unfortunately, slower income does not impact your obligations. During these periods, you can sell your invoices to a factor, gaining immediate cash flow. Although the invoices are discounted and you will pay fees and commissions, you can receive enough cash to get you through your slow periods.
Help With Business Expansions
Stagnant businesses are not healthy businesses. The goal is to consistently expand your company, and if you are going through rapid or significant growth, you need a reliable income or stable working capital. Extra cash flow can be used to hire additional staff and pay for new marketing. A factor can give you an influx of cash when you are ready to expand and improve your agency.
Favorable Financing Terms
If you get a short-term loan, you may be responsible for high interest, and the process can be complicated. In addition, your credit, cash flows and other factors are considered in the application and approval process. With a factor, your credit is not an issue because you aren’t repaying the invoices. Although you do not receive the full amount of the invoice’s value, you do not have to take on additional debt. This means you also don’t have to find collateral for the loan.
Provide Rapid Funding
It can take months to gain approval for a loan. You could be waiting months for the money you need right now. When you work with a factor, your approval may only take hours or days. Once your invoices have been evaluated and approved, you will receive your funds deposited directly into your account. In addition, there is no limit to the number of invoices or amount of money you can get from a factor, whereas banks tend to have limits.
When you sell your invoices to a factor, you don’t have to spend time trying to collect on them. Instead, the factor takes the responsibility for making sure that all the invoices are paid in full. These companies can also help with your customer relationship management and accounts receivable reporting.
If you have a staffing agency, consider all the advantages of factoring.