When a strong economy creates a demand for labor, and new clients are in need of temporary assignments, funding needs for your staffing agency can increase dramatically. Payroll costs increase at a faster pace than the rate you are being paid by new clients, meaning you are quickly burning through cash and credit.
Capitalizing on a growth opportunity may require a build-up of other assets — more permanent staffers to handle your firm’s increased workload, a marketing blitz with increased ad buys to strike while the iron is hot, or the establishment of satellite offices to provide better and more immediate customer service. And you need to free up working capital to cover the added expenses.
Access to working capital is a major need for any growing business. Yet staffing companies often find their assets and cash flow tied up in the business, so they’re left seeking outside funding to support their growth.
When looking for funding — whether to cover an increased payroll need or for working capital — the first stop is often a bank. However, some banks don’t offer the flexibility or speed you need to seize on a newfound opportunity. Banks by nature tend to move methodically. They want to verify all of your information before issuing financing, tending to make for a longer-than-desired application process.
Additionally, because your product is people, you don’t have the traditional collateral banks are accustomed to. That might mean you’ll need to put up your personal property as collateral — an unsettling risk some owners might not be willing to take.
If a bank does approve you for a loan or a line of credit, it may be for only a portion of the money you’ve requested, creating a need for additional funding from another source. That means more time spent trying to access funds and less time spent growing your business.
Instead, consider working with a payroll factoring company to get the funds you need fast. Payroll factoring is quick and easy, and doesn’t require the lengthy business or financial reviews of traditional financing. A payroll factoring company works with you to get you the short-term cash you need to cover payroll by allowing you to immediately sell your accounts receivable invoices. This allows you to preserve working capital that can be put toward growing your business.
In addition, some payroll factoring companies offer full-service factoring, which provides additional services such as cutting paychecks, printing invoices, filing payroll taxes and other tax and payroll duties that could reduce your overhead expenses.
Make sure your funding relationship is dependable and your payroll factoring partner will address the cash flow concerns that keep you up at night. While there are benefits to having a good working relationship with a traditional lender, payroll factoring companies understand the unique needs of staffing firms like yours and can provide the services you need, when you need them, to free up thecapital necessary to grow your business.