Business people always worry about “How to get an advance for my staffing payroll?”. Bank loan for staffing payrolls is not always easy to come by. The inconsistencies in cash flow don’t fit in with the criteria needed by a traditional bank. This makes staffing payrolls non-bankable. Plus, if your main struggle is meeting payroll demands in-between invoice payments, it’s risky to commit to borrowing money.
Temp and permanent placement agencies will realize alternative lenders will provide more flexible, realistic opportunities for the funds they need for payroll. There are several different types of funding packages and cash advances. Some of which work better for the unique structure of your business. Start by familiarizing yourself with what your financing options are. After that, you then have to decide which will help you get the advanced payroll support you need.
How about a Merchant Loan?
This loan is a type of cash advance paid to a business by a credit card merchant. As payments are made electronically to the company for sales, the merchant takes an agreed upon percentage for each one until the cash advance is paid back. This loan is a good option for a retail business that needs a capital burst to meet payroll. However, unless your clients primarily pay invoices with a credit card, it won’t be feasible for a staffing company.
What is Reverse Factoring?
With reverse factoring, the smaller supply company can get funding through the promise of goods being bought in the future. They may be the manufacturer of a small piece which fits inside of cell phone or the buckle on a designer bag. Knowing that the last manufacturer will pay once those goods reach their plant, a lender will advance the money and hold that invoice as collateral. This option is a great financial strategy for manufacturers who need working capital for their payroll. But just as a merchant loan, it is not suitable for temp agencies.
If you invoice your clients for the staffing services you provide, then this is a good option for getting the payment of accounts receivable on time. Invoice factoring is a strategy where you sell a lender the invoices you have that are due in future, and they advance you that money allowing you can meet payroll. A small fee is deducted from the invoice total in exchange for the service and you no longer have to wait for your client to pay their bill before you can pay your employees. The funds you receive can also be allocated to any of your other pending payables for equipment and other needs.
How to Apply for Receivable Factoring?
Unlike a bank loan, getting an advance on an invoice can take less than a week to complete. You will need to contact the lender and give them the specifics about the invoice you wish them to pay. They will check the credit-worthiness of that particular client, and may base the fees on their probability for paying. Once they have given you the working capital advance and deducted their fee, collecting on that invoice becomes the responsibility of the lender.
Since cash flow issues are constant for many staffing firms, it is not uncommon to build a cycle of invoice factoring with a reputable lender. With yours and your client’s information already established, you can receive the money you need within 24 hours. We never oblige you to hand over all of your invoices. Doing so allows you to borrow just what you need for payroll or any other expense.
Will Factoring Receivables Affect Your Credit?
Receivable factoring is technically not a loan and will have no adverse impact on your business credit rating. It may even help build your credit if you no longer are making late payments on overhead costs. Some alternative lenders offer non-recourse factoring, reducing the risk of not getting the payment if your client defaults. With this type of cash advance for staffing payroll, expect the lender to scrutinize the customer and their payment history before they agree to the transaction.
Banks are no longer the only option for staffing agencies who need an influx of cash for payroll. Avoid the high fees, interest and extra work that a small business loan brings. Find a factoring company that can help you meet all of your staffing payroll demands.