Account Receivable Factors: Why Temporary Staffing Companies Should Stop Using Account Receivable Factors for Their Working Capital
Over the last 20 years the most common way that owners of temporary staffing companies have funded their payroll has been by using account receivables factors. Factor are funding companies that will give you up to 90% of your receivables for 90 days but the newest and better type of working capital fund is in the form of payroll financing or payroll funding. Financing Solutions (www.fundmypayroll.com) provides the owner a short term fund that allows the owner to have a line of credit when the owner’s company has big months in placements.
Most temporary employment businesses have large months and then slower months. With an average turn on receivables of around 50 days, a owner need only make sure they have a funding resource that can help him/her through a few months until the money starts to come in from the client.
In the case with financing your working capital by using an accounts receivable factor, you really are locked into a long term funding situation. The factor often will charge you a large upfront yearly fee plus a substantial interest rate on the advanced funding. A payroll financing company is specifically designed for you to have a short term fund where the principal with no future interest can be paid back at any time that the owner is ready or the owner can continue the fund with a low monthly payment until he/she is ready.
Over the life of the fund, the payroll financing method should be cheaper then the accounts receivable factor and give the temporary staffing owner the peace of mind that whenever he gets into a bind with making payroll, that he has a funding plan.
Financing Solutions (www.payrollfinancingsolutions.com) provides fast business funds of $5,000-$100,000 to good small businesses with sales of $500,000-$7 million that can be used for working capital.