According to an American Staffing Association (ASA) survey, businesses with 25 or more employees use staffing services for 3 primary reasons:
- Fill in for absent employees or temporary vacancies (80%)
- Provide extra support during busy times or seasons (72%)
- Staff special short-term projects (68%)
If not, you need to consider payroll factoring. Many times when large employee contracts come your way, there is not enough time to go through the time-consuming process of getting a loan. Sometimes the heavy demand may last only a few weeks or months. You don’t want to put more debt on your books for a short-term increase in demand. Or, you may be unable to qualify for traditional financing for a variety of reasons, including compromised credit or length of time in business.
Payroll factoring enables you to meet this short-term or seasonal demand without overtaxing your available cash flow. If your customers’ demand for employees grows substantially during seasons, such as Christmas, you can factor all or some of your invoices to pay the added payroll. You’ll get 90% of the receivables advanced to you immediately and the other 10%, less the factoring fees, when the invoices get paid. You can use the advance to meet your additional payroll expenses during the high-demand season. Similarly, if you have an existing or new client who requires a large additional workforce for a short-term project, you can use factoring as well. Some factoring companies do require minimum volumes and time frames so you need to make sure you utilize factors that do not have these requirements.
Once you set up the arrangement, you can have your funding within 24 to 48 hours after you submit your invoices. Many factors will let you pick and choose the invoices to factor or factor all your invoices. It’s your choice. Plus, they can handle the process of collecting the payments on the invoices and many offer other administrative services specific to a staffing company.
Capitalize on Every Opportunity
With a factoring relationship in place, you won’t have to forgo any big short-term or seasonal contracts due to lack of cash reserves or working capital. You can ramp up your operations as the need arises, without being locked into a long-term debt situation or repayment schedule. Since the factor actually buys the invoices at a discount the transaction does not go onto your books as debt or negatively impact your debt-to-equity ratio. It should not affect any loans or credit lines you currently have unless you choose to pay them off.
If you want more information on how to take advantage of short-term or seasonal demand with factoring, sign up today!