Factoring can help expedite cash flow for a myriad of business to business industries. Staffing Companies are one of these industries that generally take advantage of Factoring.
But Why?
Staffing Companies usually pay their employees for their work on a weekly basis, while also accounting for taxes and in some cases, insurance benefits. However, the staffing company invoices for the work done like most any industry invoices and therefore gets paid, typically, at net 30. This can create a cash crunch for the staffing company. Factoring can help to alleviate this cash crunch and free up capital to take on more contracts.
Staffing companies sell their invoices directly to the factoring company that, in turn, pays the staffing company for the invoices minus a small discount and fee. This allows the staffing company to not only pay their employees for their work done, but also continue to run their business and acquire new contracts. When the invoice becomes due, payments are made to the factoring company and any difference between the total invoice amount and the amount originally advanced, minus the factoring fee, is then sent back to the staffing company.
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