Most commercial cleaning and janitorial companies are small businesses – started by entrepreneurs who had an idea and plenty of motivation. Few, however, have plenty of capital. But that is understandable because janitorial companies tend to be easy to start – buy some supplies, hire some people and you are ready to go.

But there is a big catch to this business model – commercial clients don’t pay for janitorial services upfront. Rather, they pay on a net 30 to net 60 days. This means that you only get paid a month or two after completing the work. In the meantime, you still need to buy more supplies and pay your employees.

If your company is well capitalized, waiting to get paid is not usually a problem. On the other hand, if your company is not well capitalized, waiting can be a very serious problem. The simple solution to this challenge is to get business financing. This is almost always a problem for the company since few janitorial companies have substantial assets to use as collateral – and institutions need collateral to issue business loans. More often than not, the business owner will need to put their house (or other assets) as collateral to secure the business loan. However, business loans are not the only alternative.

One solution is to use invoice factoring. This financial tool provides you with a quick payment for your invoices, boosting your cash flow and enabling you to meet your expenses. To qualify for factoring you need to have invoices from credit worthy clients. This makes it an ideal solution for janitorial companies that handle commercial work for large clients.

Most factoring transactions are structured in two payments. You get the first payment, usually 80% of the invoice, as soon as the work is done and you invoice your client. You get the second payment, the remaining 20% less the financing fee, as soon as your client pays the invoice in full.

One advantage of factoring is that it enables you to leverage your client’s credit to your advantage. Furthermore, it’s a dynamic product that is tied to your sales. This means that your financing line increases as your sales to credit worthy clients increase. This makes it ideal for small janitorial companies who are experiencing growth.

Although conditions are improving as we are emerging from one of the worst recessions in history, getting business financing remains very hard. This is difficult for small companies because they are having the hardest time getting financing even though they need it the most. Outsourced labor companies such as security guard companies and staffing agencies are noticing a significant improvement in their sales but can’t follow through because they are not well financed.

To make things harder, commercial customers that used to pay their invoices in 30 days are now taking 45 days or longer to pay. This creates a serious cash flow problem, since security guard companies need to cover payroll on a weekly basis. Few companies can afford to wait that long to get paid.

One way to solve this cash flow problem is to shorten the time between delivery of services and receipt of payment. Since asking clients to pay sooner seldom works, the alternative is to use invoice factoring.

Invoice factoring provides an advance on slow paying invoices. The mechanics are simple. You sell the invoice to a factoring company, who pays you for it upfront. This provides you with the funds you need to meet your companies expenses. The transaction is settled once your client pays the invoice in full. Factoring companies always structure the purchase in two parts. The first part, called the advance, covers 80% to 90% of the invoice and is given to you immediately. The second part, which is the remaining 10% to 20% is provided once your client pays. The factoring fee is usually deducted from the second transaction.

Invoice factoring has been gaining popularity in the past few years. And in many circumstances, invoice factoring can provide a better solution than a business loan. Furthermore, factoring is easier to get than most business loans.

A major advantage of accounts receivable factoring is that factoring companies look at the credit quality of your invoices as one of the most important parameters in their funding decisions. This means that small but well run companies whose only asset are invoices from good clients can usually qualify.

Although the economy is recovering, the strength and duration of the recovery remain uncertain. Because of this, many companies are reluctant to hire permanent employees, opting instead to use a temporary staffing agency to fulfill their personnel needs.

The staffing industry has seen a considerable increase in their level of activity as companies start ramping up their production. Although this is very good for the industry, it also creates a cash flow problem. The employees that are hired by the agency need to be paid weekly (or every two weeks), but clients pay their invoices in 30 to 60 days. Therefore, staffing agencies need a financial cushion to handle these expenses until their clients pay. The demands on this financial cushion will increase if the agency lands a new contracts.

One easy way to fix this problem is to put more capital into the business – either directly or through investors. This can be complicated, and could involve giving up some equity in your company. Another alternative is to get business financing – either through a business loan or a line of credit. Both of these products can be hard to get as the company will need to show solid assets, an experienced management team and a well crafted business plan. The problem is that staffing agencies don’t have assets in the traditional sense of the word – there is little if any real estate, and no machinery or equipment. The assets are their employees, and those walk out the door every day. There is an alternative to conventional business loans that can work well in this situation – it’s called invoice factoring.

Invoice factoring provides an advance payment for the staffing agency’s accounts receivable. This reduces the time you wait to get paid from 45 days to just a few days. This reduces your reliance on a cash cushion and provides liquidity to meet your company’s expenses.

Also, invoice factoring is easier to get than conventional financing. Most factoring companies consider your invoices to be strong assets. Because of this, a factoring company will usually be willing to extend financing to small businesses that have potential and solid customers. This makes invoice factoring a very accessible form of financing.

Of all the responsibilities that temporary staffing agency owners have, none is more important than payroll. Employees are the lifeline of the business and making sure they are paid in time goes a long way at ensuring your company has smooth operations. Paying employees on time can be very challenging, especially if a client is late with a payment.

Let’s look at a common scenario for a staffing company. A client leases 10 employees for a short term two week contract. At the end of the two weeks the staffing agency will have to pay the employees. Your client, on the other hand, will get an invoice from you and pay it in 30 to 45 days. Unless you have the funds to pay your employees while waiting for your own payment to arrive – you are going to run into a problem. This situation is unfortunately common in the industry.

The obvious way to solve this problem is with business financing. This is easier said than done. Getting a business loan in Canada can be very difficult. Most banks are very conservative and will only make business loans to clients that can show substantial assets and impeccable financial statements. While these are desirable characteristics, the biggest asset that a staffing agency has is its employees. This makes them hard to finance.

If we look at the problem, it’s fairly simple. It’s the payment gap between delivery of services and payment by the client. One easy way to handle this is to use invoice factoring. Invoice factoring provides a funds advance for the invoice. This gives you the funds to meet your payroll and business expenses without having to wait for your client to pay.

Most transactions are structured with two payments. The first payment varies but it’s usually about 85% to 90% of the invoice. This payment is given to you as soon as you submit the invoice for financing. The remaining 10% to 15%, less a fee, is advanced once your client actually pays for the invoice.

One of the big advantages of factoring is that it’s easy to qualify for. The most important requirement is that your client have solid credit and the ability to pay the invoice on time. This makes it a great alternative for growing staffing agencies.

The last decade has been a boom for security agencies. As the security consciousness of the nation has increased, so has the demand for companies that provide security personnel. Private security guards are now guarding airports, large companies, infrastructure concerns and many public places. In summary, these have been financially rewarding times for companies in this business.

At the same time, managing growth has been very challenging for the company owners. Security guard agencies have heavy payroll responsibilities. They must be able to pay their guards on time, every time. The problem is that most of their commercial clients pay their invoices in net 30 to net 60 days. The problem is simple, owners have to meet weekly (or bi-weekly) payroll, but clients pay in 30 to 60 days. So, unless the company has a substantial cash reserve to handle payroll in the interim, it will run into problems. The solution is to get business financing.

For small businesses, getting business financing is easier said than done. Getting a business loan is very difficult in this environment. And anyways, business loans are not necessarily the solution to this problem. Why? Generally, business loans are best suited for buying assets and then paying them down over a number of years. A better solution, and one that eliminates the payment timing problem, is to get and advance against your invoices. This provides the funds you need to cover payroll and operate your business.

How do you get an advance on your invoices? There is a product called invoice factoring that does just that. It provides advances in your slow paying invoices. The proposition is simple. The factoring company advances you funds against your invoices and then gets paid once your client pays the invoice. What separates factoring companies from other solutions is that they provide funding against the business credit of your client. This means that a small company (or a startup) can usually get funded based on the strength of their client. Although the credit worthiness of your client is the most important requirement, it’s not the only one. To qualify for factoring, your company must have not liens, judgments and have owners with a good track record.

Running a staffing agency requires a combination of good sales skills along with solid organizational skills. As an owner (or manager) you need to make sure that you are signing on new clients who will use your staff. At the same time, you need to recruit quality staff that will ensure that you meet your client’s expectations. And while you do this, you also need to make sure that payroll is handled so that your team is always paid on time.

For many staffing agency owners, this last point can be a real problem, especially if the company is starting up or growing too quickly. Most commercial clients will be happy to use your staff for a contract, but they will pay their invoices in 45 to 60 days. In the meantime, your company needs to cover all employee payroll. You have to pay salaries, retain taxes and cover any benefits you offer. Many agencies just can’t afford to wait that long to get paid.

Most agency owners will opt for a line of credit, if they can qualify for this form of business financing. But qualifying for a line of credit, or a business loan for that matter, can be very difficult. This is especially true for staffing agencies that have no hard collateral. As it’s well known, most institutions provide business loans to companies that have both, the earning ability to pay the loan back and enough collateral to cover the loan if they can’t pay it back. Because of this, only staffing agencies with good track records, solid customers and seasoned management teams get institutional financing.

Unless you manage to get external funding, your staffing agency’s growth will always be limited by your capital. However, there is one funding alternative that will help solve your problem. If you look at the situation, you’ll see that the problem is one of timing. You need to pay employees now, but your clients want to pay later. And the way to bridge this gap is to get an advance on your client invoice. This provides you with the funds to meet your current obligations and handle new projects.

This solution is called invoice factoring and is offered by factoring companies. A factoring company considers your accounts receivable (invoices) from good clients to great collateral. Because of that, they are willing to advance you funds against those invoices. One advantage of factoring is that it helps you meet your current liabilities. A bigger – and often ignored – advantage is that it can help your company to bid for bigger contracts. How is that? Many staffing agencies have been able to win very large contracts and then arranged to factor their invoices before their payroll is due. The potential of this strategy is obvious. When done correctly – and it does take good organizational skills – it can help grow your company very quickly. Because of this, accounts receivable factoring can be a great tool for staffing agencies with good growth potential.

One of the toughest challenges that business owners face is that clients never want to pay their invoices immediately upon receiving the service or the product. Most clients, especially large corporations, demand to be given 30 to 60 days to pay their invoices. Offering trade credit, as providing net 30 day terms for payment is usually called, is very common in commercial transactions. It’s the way business operates. And when done correctly, it can be very safe and give you an advantage over competitors that can’t offer net 30 terms.

But should you offer this to any client just because they ask? No, not without doing a little bit of research about your client.

There are two simple ways to research a client. The first one invoices getting a commercial credit report from either Dun and Bradstreet or from Smart Business Reports. A commercial credit report, which anyone can buy, provides useful information about your clients. It shows liens, judgments and more importantly, it shows how quickly your client pays their invoices. The payment history is the most important piece of information on the credit report. Most reports will also give you a credit score and a credit recommendation. You can buy these reports by going to Dun and Bradstreet’s or Smart Business Reports respective web sites.

However, not ever company has a credit file with Dun and Bradstreet or Smart Business Reports. This is especially true for small and medium sized companies that don’t have a wide exposure. In that case, your best alternative is to ask your client to submit a credit application which includes references. Be sure to check on those references and about their payment experience and average outstanding volumes.

What if your problem is that you cannot wait 30 days to get paid because you need funds to run your business? One alternative is to go to an institution to try and obtain business financing. However, in this economy, getting a business loan is very hard. Another alternative is to factor your invoices. Invoice factoring is a form of financing that give you an advance for your net 30 invoices. It provides the working capital you need, without having to wait for your clients to pay you first.

Author: This article was authored by Marco Terry of Commercial Capital LLC and remains the exclusive property of Marco Terry/Commercial Capital LLC

One of the biggest challenges for staffing company owners is meeting payroll. Employees must be paid every week – without exception. However, paying employees can be very difficult if an agency does not have predictable or reliable cash flow. What is worse, waiting for a payment from a slow paying client can seriously jeopardize the agency’s ability to function.

This situation, unfortunately, is quite common in the staffing industry.

What is the solution? When owners or managers face slow cash flow their first instinct is to try and get business financing from their local bank. However, they soon learn that getting a business loan is very difficult. Most banks require that the owner have an extensive business history, spotless personal credit and substantial collateral. Unfortunately, businesses seldom qualify for small business loans.

Nevertheless, there is an alternative that can help you finance you staffing agency. It’s easier to obtain than a business loan, can be set up in days and is available to most business owners. And, it provides staffing agencies predictable cash flow.

The solution is called invoice factoring. Factoring provides you with an advance on your invoices from slow paying clients. That advance – available soon after you invoice for your work – can be used to cover payroll and other expenses. In effect, factoring receivables provides you with predictable cash flow enabling you to better operate your staffing company.

How does invoice factoring work? Well, it’s a simple solution. It works as follows:

1. You deliver a copy of the time sheet and invoice to the factoring company
2. The factoring company advances up to 90% of the invoice within 24 hours
3. Once the invoice by the customer the transaction is settled

Factoring fees can range from 1.5% to 4% per month and are based on your business volume and other criteria.

One of the most attractive features of factoring is that it is easy to obtain. Most staffing agencies will qualify provided that they do business with good customers and are free of problems. Factoring invoices is an ideal solution for both established and new companies and can help propel your business to the next level.

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.