Why Factoring Is Important to Your Staffing Business

The factorization can be a great financial tool for business personnel in the home to use it wisely.

Simply put, factoring third-party commercial loan (or bank) cash business accounts receivable (invoices) change the financial transactions. In other words, if you can not afford to wait for your original payment from the client, you can sell a cash invoice. Cash advances you can think of. Remaining balance when you pay loan fees, invoices and accounts receivable are sold at a discount to the loan less business to the front of typically 80-90% of the original invoice.

Why would you do that?

Revenue bonds to fund the staffing companies, the most common reason is to make more capital available to operate their business. Typically, personnel, employees or contractors to pay the weekly expected, however, the client invoice payment, usually 30 days from receipt of the invoice 60 + days from the date. By factoring staffing companies will receive their salaries, including payroll taxes and other cash requirements to meet the needs of short-term capital cash.

However, there is no other way?

Yes, of course. You can perform the job and a bank loan or venture capital group You can focus on the company's total assets or cash flow typically factorization because the bank funds or venture capital funds, but you can easily get more than the value of the accounts receivable. Factorization is also a cheap and fast way to enlist the help of a venture capital group than The shares of the company to provide venture capital funds take longer, and need.

Consideration when factoring?

The main purpose of the bond financing (factoring) will help you to manage your cash flow better. It's A / R increased the cost of funds will be considered in situations where low-cost funding sources and the lack of cash flow can not be solved when you increase your available cash flow to receive less than the economic benefit.

For example, let's instead of, says great customer requests to extend their payment period of 30 to 60 days. You can not afford to wait an additional 30 days to receive money? Factorization more conditions to its customers, and other business assets to fall without the risk at the same time be able to continue the sales growth of its customers and employees.

If you lack enough capital to your order, add the number of additional staff to provide you sell a sudden and unexpected spike?

If you need cash in order to meet your short-term operational requirements of your business cycle downturn or slow for some time, when you buy some of the bonds in order to support the cash flow crunch can be decomposed is

The decision to use factoring is always a good economic sense. If used properly, it will help you to make the size and profitability necessary to secure a source of financial costs in the future.