As a staffing agency owner, your biggest concern is making sure your employees get paid on time – always. In this article, we’ll discuss a tool that will help you get the funds to meet payroll every time. We’ll also talk about a financing tool that will let you take on new contracts, even those that you think are too big and can’t possibly afford to win. This financing tool is easy to qualify for (it’s NOT a business loan), can be set up in days and can give you all the necessary funding your staffing agency needs.

This tool is called invoice factoring, and also referred to as receivable factoring. This financing is not offered by a bank, but rather by a factoring company.

If you are like most agency owners, your problem is not lack of work or customers. I am sure you have plenty of both. Your biggest problem is that your customers take between 30 and 60 days to pay their invoices. But, your employees need to be paid weekly (or bi-weekly). And unless you have a fat bank account, the math does not work. Sooner or later, you’ll run out of money.

But what if you could eliminate slow paying clients? No, I don’t mean that you should stop doing business with them. I mean, what if you could turn them into quick paying clients? What would happen to your business if every client was guaranteed (yes, guaranteed!) to pay you in 2 business days? How many of those clients could you take?

Let me have a guess. You could take as many of those clients as you could get your hands on.

By factoring your staffing agency receivables, you can turn your slow paying invoices into quick paying invoices. The process is simple:

1. You do your work, as usual. You bill your customer but then submit a copy of the invoice to the factoring company for financing
2. The factoring company provides you an immediate advance on 90% of the invoice. You can use that money to meet payroll and pay expenses.
3. The factoring company waits to get paid by your customer
4. Once they are paid, they rebate the remaining 10%, less their fees

The main requirement for factoring is that you do business with good paying customers. If your customers pay regularly (but slowly) you can almost always qualify. And as opposed to a business loan, your personal credit is usually not an issue.

So, if you own a growing staffing company, be sure to consider factoring invoices.

In the past few years we’ve seen a massive increase in the security industry. Airports have beefed up their screening and security. Public and private buildings have more guards. Even business are ramping up their security procedures and hiring guards to keep premises and employees safe.

In other words, it’s a great time to be the owner of a security guard agency. Provided, of course, your company has the necessary financing resources to meet your payroll and business expenses.

But meeting payroll can be very tough. Especially since commercial and government clients usually pay their invoices in 30 to 60 days. How can you pay employees every week if your clients take that long to pay? The math just doesn’t work.

The solution to the problem is to get financing. But I am not talking about getting a business loan. Small business loans are hard to get. There is a better solution that is easy to qualify for and quick to set up. This financing tool is called invoice factoring and your bank does not offer it. Rather, you get it through a factoring company.

The premise behind security agency factoring is very simple. Your invoices from good (but slow) paying customers are an asset – a valuable one. The factoring company is willing to provide you with financing using them as collateral. Factoring is easy to use and works as follows:

1. You do your work, as usual. You bill your customer but then submit a copy of the invoice to the factoring company for financing
2. The factoring company provides you an immediate advance on 90% of the invoice. You can use that money to meet payroll and pay expenses.
3. The factoring company waits to get paid by your customer
4. Once they are paid, they rebate the remaining 10%, less their fees

As you can see, factoring eliminates waiting for payment and gives you funds to run and grow your business. Factoring provides peace of mind, enabling you to meet payroll easily. It also allows you to take on new big clients with confidence, knowing that you’ll have the resources to pay your employees.

If you own a security guard company or security agency, be sure to consider factoring invoices as a tool to grow your business.

Running a construction company that installs underground utilities or over ground cables can be very profitable. Most of the times, the clients are top rates companies such as major utilities or cable operators. Although profitable, keeping enough working capital to meet payroll and other obligations can be challenging. Especially since cable companies and utilities tend to pay their invoices in 30 to 65 days. Few cable installers can wait that long to get paid. For starters, they need to meet payroll which is usually weekly or bi-weekly. Then, there are also suppliers that need to get paid.

Is getting a business loan solution? Not always. First, getting business loans is particularly difficult in the current banking and credit environment. Second, although small business loans can be a great tool for business financing, they are not always the best solution to a problem. Let’s examine the situation in more detail.

Most cable installers, especially startups or rapidly growing companies, run into the following situation. They get a lucrative contract to perform a job that stipulates that the installer can bill regularly, usually weekly, based on the length of installed cable. Now at the end of the week, the installer can bill the client but will also need to pay all of his employees. However, payment from the client will not come until the following month, so he will need to pay employees out of savings. Unless your business has a substantial bank account, sooner or later you will start turning projects down or you will run out of money.

But what would happen if your clients paid you in 2 days, rather than 2 months? Then you would not have these problems. You’d be able to run your business efficiently and grow it when new opportunities come by. Although you cannot make your clients pay sooner, you can achieve the same results by using construction factoring.

Accounts receivable factoring provides a very simple proposition. As soon as the work is completed, you can sell the invoice to a factoring company. The factoring company buys your invoices in two installments. The first installment, called the advance, will cover about 80% of the invoice’s amount. The second installment, paid to you once the client pays for the service, covers the remaining 20% (less a small fee). A small fee is subtracted from the second installment to cover for the cost of the service.

One of the advantages of working with factoring companies is that construction factoring is much easier to obtain than conventional financing. Furthermore, the size of your financing line is tied directly to your sales and therefore grows with your business. This makes it an ideal solution for small and growing businesses.

Getting business financing is tough when the economy is doing well and almost impossible when the economy is doing badly. There is a reason for this, lending money to a business is considered risky, especially for financial institutions. This is why most institutions will ask for audited financial statements and will insist that your business must have good collateral. What qualifies as good collateral? Usually real estate, machinery and accounts receivable in some combination. Furthermore, institutions also want to see a multiyear track record in which your company shows substantial growth.

But – what if you own a startup? Don’t have hard collateral? Or, what if your business is in a turnaround situation? Usually, you’ll be out of luck. Fortunately, there are other options.

There are alternate business financing solutions that can work well in many instances. For example, let’s say that your commercial clients take 30 to 60 days to pay their invoices. This can create a challenge for most businesses. If you can’t get a conventional business loan, a good alternative is to use factoring. Factoring, which has been gaining traction recently, provides an advance against your slow paying invoices. It provides the working capital you need to pay business expenses and eliminates the timing challenges of waiting for payment.

Here is how it works. Let’s say that you sell a product (or service) and then invoice your client expecting payment in about 45 days. A factoring company can advance about 80% of what is due to you within days of invoicing. You get the remaining 20%, less a service fee, once your client pays the invoice in full.

Stated differently, you get about 80% soon after invoicing, and the remaining 20% (less the fee) once your client actually pays.

For most businesses, getting an 80% advance spells the difference between being able to run the company and going out of business. It provides the liquidity to pay employees and suppliers in a timely way. For many, it allows them to take new clients without worrying about their payment terms.

Factoring companies consider your invoices from good credit worthy clients to be excellent collateral. This enables them to advance money against them. Now, this does not mean this is the only criteria they will look at. Most factoring companies will want to make sure that your company is free of judgments, lawsuits and liens.

One critical advantage of invoice factoring is that it works very well for startups. Most factoring companies are happy to work with clients whose biggest asset is a roaster of good paying clients.

One of the biggest obstacles for small business growth is access to working capital. Companies that have access to business financing, are usually better positioned to take advantage of opportunities – and – better positioned to weather challenges successfully than those that don’t have it.

But getting working capital is a major challenge for most businesses, especially startups and small companies. Most will not be able to meet the requirements for a conventional business loan or line of credit. Plus, conventional business loans are usually offered to companies that have long track records of success and hard assets. Few startups and small businesses meet these criteria.

However, business loans are not the only way to finance a company. There are some alternate ways of financing that have started to gain popularity in the recent years. One alternative is called accounts receivable factoring, also known as invoice factoring.

Invoice factoring solves a very simple but common problem. Most companies that sell to other businesses have to wait 30 to 60 days to get paid. However, few can afford to wait that long. This is a major problem for small companies that don’t have a strong balance sheet and need funds to pay suppliers and employees. Factoring provides an advance against your slow paying invoices and gives you the working capital to pay employees and suppliers. It puts you on a stronger financial footing, enabling you to take on new businesses without worrying about payment terms.

A factoring transaction works as follows. First you deliver your product/service and invoice the client. Then, the factoring company advances you up to 80% of your invoice. This is your first installment. Your company gets the remaining 20%, less the service fee, once your client actually pays for the invoice.

So the benefit is simple. You get 80% upfront and the rest once your client pays.

Invoice factoring is a great solution if your cash flow is not predictable and if you can’t afford to wait 30 to 60 days for your invoices to get paid. It provides you with predictable cash flow, providing you with another tool to grow your company.

For product distributors, cash flow is always a big concern. Unless you have been in business for a long time, most suppliers will insist that you pay them soon after delivering the goods. Or worse, prior to delivery. However, most of your clients will insist in paying your invoices on net 30 or net 60 days. This creates a simple problem – you have to pay suppliers quickly, but clients pay slowly. Although your business may be profitable, unless you have adequate working capital, you will have cash flow problems.

When faced with a cash flow problem, most business owners try to get a business loan. Although business loans can work well in many situations, they can be inflexible especially if your business has growing capital needs. Also, qualifying for a business loan can be difficult since institutions usually require substantial collateral and track records showing profitable operations for many years. This makes them a tough option for new or small businesses.

But there are better solutions though. Let’s examine the situation. The problem is the time delay between having to pay your supplier and getting paid by your client. What would happen if you could reduce the time delay? For example, let’s say that your client paid you in two business days rather than two months. Would that solve your cash flow problem? For most, it would.

You can achieve just that by using invoice factoring.

The value proposition of invoice factoring is simple. It reduces the time delay between delivering goods and getting paid. This puts your business in a better cash position and enables you to take on new opportunities.

Factoring involves selling your invoices to a factoring company. The factoring company buys your invoices in two installments. In the first installment, you get 80% of the invoice advanced to you. You get the remaining 20% (less a fee) as a second installment, once your client actually pays for the goods.

One of the advantages of factoring accounts receivable is that is a very flexible solution, where the maximum amount you can finance is mostly determined by the ability of your clients to pay your invoices. Said differently, your factoring financing line is tied to your sales and grows with your sales. Because of this, small companies that do business with large credit worthy clients can benefit from using factoring.

Building a company in a tough credit environment is not an easy task. And many companies run into financial problems not necessarily because they lack opportunity – but rather because they lack business credit.

Obtaining any form of business financing during troubled times, especially a business loan is very difficult. During hard times, most institutions tend to tighten their credit standards making business loans inaccessible to all but the most credit worthy businesses. And in part, that is how many medium and smaller sized businesses run into trouble. Without easy access to financing, they become vulnerable.

There are some forms of business financing that are available to businesses – even businesses that have problems. For example, let’s examine a recurring situation in commercial transactions. Commonly, companies extend business credit to their clients and wait around 45 days after the sales to get paid for their products/services. By doing this, you are providing your client with a short term loan. Unfortunately, you don’t have an alternative. Most clients demand payment terms as a cost of doing business with them. This is a problem because few companies can afford to wait 45 days to get paid on their invoices.

There is a solution to this issue, which may work better that a small business loan. It’s called invoice factoring. An invoice factoring arrangement provides you with an advance, secured by your invoice. Basically you get about 80% of its face value as a first installment, which enables provides liquidity to cover business expenses. The remainder 20%, less a service fee, is given to your company as soon as the invoice is paid for.

Most companies use factoring to cover cash flow shortfalls, at least initially. However, factoring’s potential comes from how it can help your firm grow. It’s a simple proposition. If you had clients that could pay their invoices in two days, how many would you take? Most owners would take as many as they can get. And that – quick payments – is what factoring financing really delivers.

The cost of invoice factoring varies based on how much funding you need, for how long, and the payment quality of your clients. Generally speaking fees can range from 1.5% to 3.5% for 30 days, but they vary broadly based on many parameters.

Factoring does not work for everyone though – it only works for commercial sales. Specifically, it works for companies that sell on terms to other businesses and who can’t afford to wait to get paid.