Receivables Factoring Gives Staffing Agencies Competitive Edge
Receivables factoring is moving to the forefront of business financing techniques used by staffing companies to cope with cash flow challenges that come with rapid growth.
March 28, 2011 - Fredericksburg, VA - (http://www.smart-business-financing.com) Staffing agencies are playing an increasingly important role in meeting the personnel requirements of many companies that remain reluctant to hire permanent employees in the still fragile economy. With demand for their services skyrocketing, staffing firms are faced with chronic cash flow problems, as they struggle to make payroll and pay for rising overhead before ever receiving the first dime or revenue from their new clients. And like many other small businesses, staffing agencies have been adversely affected by the tightened credit policies of traditional primary lenders.
According to a February 2011 CNN Money article, banks cut small business financing by $43 billion, or 6.2%, between June 2009 and June 2010, and the U.S. Small Business Administration reports a drop of $59 billion in small business lending since June 2008.
At the same time demand for their services is growing, staffing firms, like many businesses in other sectors, are being squeezed between tighter credit and "strategic" late payers - customers that deliberately pay bills late to protect their own cash flow.
According to Mike Lieber, Smart-Business-Financing.Com contributor and 13-year commercial finance veteran, the late payers phenomenon is a largely unreported, rapidly spreading plague that is hurting businesses across the board but devastating cash-hungry companies like staffing agencies.
"Ironically, the staffing industry is especially vulnerable because it is experiencing intense growth pressure in the midst of a credit crunch," he says. "It's a great opportunity, but without solid financial management, an agency can actually grow to death."
The answer to this problem, according to Lieber, is a technique known as accounts receivable factoring.
Receivables factoring offers businesses a method to bridge the gap between the time employee payroll and other expenses are due and the time when clients pay their invoices. Widely used in other countries, particularly in Europe, business factoring is an ancient asset based finance method only now moving into the mainstream of U.S. business financing.
"Most agency owners still think their only options are a business line of credit or bank loan, but while their competition is busy filling out complicated loan applications that will probably be rejected, smart staffing agencies are talking to factoring companies," Lieber says.
Factoring companies are in the cash flow business, specialists in helping companies convert outstanding invoices into immediate cash. For a small fee, they will purchase an invoice as soon as at is created, advancing up to 95 percent of the face amount, with the balance held in reserve until it is paid in full. Once payment is collected from the customer, the invoice factoring company deducts its fee and deposits the balance directly into its client's bank account.
To determine advance rates and fees, an invoice factoring company will assess the creditworthiness of the staffing agency's clients, invoice terms and average time to collect, and the volume of invoices to be factored.
With business factoring, a staffing firm gets fast access to business capital, allowing it to accept and extend terms to new clients while continuing to make payroll and pay other expenses. And because invoices are sold, receivables factoring does not create a liability, but rather turns accounts receivable into liquid business capital. In short, business factoring provides a powerful competitive edge to staffing firms, laying a solid foundation for unlimited growth without using personal funds, credit cards, or taking on burdensome debt.
"For the owner of a staffing agency, receivables factoring is unbeatable," says Lieber. "It is a rock-solid financial platform that offers maximum flexibility and grows automatically with the company."
About AEGIS Financial Solutions, Inc.: Since 1998, AEGIS Financial Solutions, Inc. has been helping people solve financial problems and get money when they need it most, using the vast resources of the non-bank cash flow industry.
Press Contact:
Mike Lieber, President
AEGIS Financial Solutions, Inc.
88 E. River Bend Road
Fredericksburg, VA 22407
mjl@aegisone.com
PH: (540) 548-2270
###
March 28, 2011 - Fredericksburg, VA - (http://www.smart-business-financing.com) Staffing agencies are playing an increasingly important role in meeting the personnel requirements of many companies that remain reluctant to hire permanent employees in the still fragile economy. With demand for their services skyrocketing, staffing firms are faced with chronic cash flow problems, as they struggle to make payroll and pay for rising overhead before ever receiving the first dime or revenue from their new clients. And like many other small businesses, staffing agencies have been adversely affected by the tightened credit policies of traditional primary lenders.
According to a February 2011 CNN Money article, banks cut small business financing by $43 billion, or 6.2%, between June 2009 and June 2010, and the U.S. Small Business Administration reports a drop of $59 billion in small business lending since June 2008.
At the same time demand for their services is growing, staffing firms, like many businesses in other sectors, are being squeezed between tighter credit and "strategic" late payers - customers that deliberately pay bills late to protect their own cash flow.
According to Mike Lieber, Smart-Business-Financing.Com contributor and 13-year commercial finance veteran, the late payers phenomenon is a largely unreported, rapidly spreading plague that is hurting businesses across the board but devastating cash-hungry companies like staffing agencies.
"Ironically, the staffing industry is especially vulnerable because it is experiencing intense growth pressure in the midst of a credit crunch," he says. "It's a great opportunity, but without solid financial management, an agency can actually grow to death."
The answer to this problem, according to Lieber, is a technique known as accounts receivable factoring.
Receivables factoring offers businesses a method to bridge the gap between the time employee payroll and other expenses are due and the time when clients pay their invoices. Widely used in other countries, particularly in Europe, business factoring is an ancient asset based finance method only now moving into the mainstream of U.S. business financing.
"Most agency owners still think their only options are a business line of credit or bank loan, but while their competition is busy filling out complicated loan applications that will probably be rejected, smart staffing agencies are talking to factoring companies," Lieber says.
Factoring companies are in the cash flow business, specialists in helping companies convert outstanding invoices into immediate cash. For a small fee, they will purchase an invoice as soon as at is created, advancing up to 95 percent of the face amount, with the balance held in reserve until it is paid in full. Once payment is collected from the customer, the invoice factoring company deducts its fee and deposits the balance directly into its client's bank account.
To determine advance rates and fees, an invoice factoring company will assess the creditworthiness of the staffing agency's clients, invoice terms and average time to collect, and the volume of invoices to be factored.
With business factoring, a staffing firm gets fast access to business capital, allowing it to accept and extend terms to new clients while continuing to make payroll and pay other expenses. And because invoices are sold, receivables factoring does not create a liability, but rather turns accounts receivable into liquid business capital. In short, business factoring provides a powerful competitive edge to staffing firms, laying a solid foundation for unlimited growth without using personal funds, credit cards, or taking on burdensome debt.
"For the owner of a staffing agency, receivables factoring is unbeatable," says Lieber. "It is a rock-solid financial platform that offers maximum flexibility and grows automatically with the company."
About AEGIS Financial Solutions, Inc.: Since 1998, AEGIS Financial Solutions, Inc. has been helping people solve financial problems and get money when they need it most, using the vast resources of the non-bank cash flow industry.
Press Contact:
Mike Lieber, President
AEGIS Financial Solutions, Inc.
88 E. River Bend Road
Fredericksburg, VA 22407
mjl@aegisone.com
PH: (540) 548-2270
###
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