When temporary staffing agencies have cash flow problems they typically have two options: either apply for a loan and hope for the best or use invoice factoring. Today, we’ll talk about why using factoring in this situation could be the better option.
Companies that bill their clients via invoice typically find factoring to be an effective way to address any cash flow problems. Since temp agencies don’t receive payments from their clients until after they have filled their job vacancies, there’s a good chance there might be some cash flow problems.
Temp staffing agencies generally pay for any advertising needed to successfully place job candidates. They only bill their clients after they have found a worker and that person has physically worked. This means that they have to wait, sometimes a substantial amount to time, before they get paid. Temp agencies are usually paid per hour, based on the amount of hours their placement employee has worked. While waiting for payment, these agencies still need to pay for their payroll, rent, supplies and advertising costs.
This is where factoring comes in. When a company chooses to factor their invoices in order to generate cash, in most cases, they’re able to secure up to 92% of their invoices’ value within 24-48 hours. Temporary staffing agencies no longer need to worry about if they qualify for a loan. Invoice factoring allows much more flexibility, and doesn’t come along with any debt or repayment. Factoring allows the agency to meet their monthly obligations without taking on any new debt.
If you’re interested in learning more about how CoreFund Capital can help your staffing agency, contact us today!