When most people think about the industries served by Asset-Based Lenders or Factoring Companies, they think of manufacturers, distributors and wholesalers. For a growing company, the capital and labor costs to get product delivered to their customers can put a strain on cash flow. This problem is intensified when that customer takes 30, 45 or even 60 days to pay their invoice. That Current Asset (accounts receivable) is not cash. It cannot be used by the company to pay a supplier, meet payroll and other financial obligations. Therefore when an Asset-Based Lender provides a working capital line that converts existing eligible Accounts Receivable to cash, the company can put the cash to work immediately to help grow the business.
When speaking with bankers, CPAs, attorneys and other business consultants, we found it surprising that many did not realize that Asset-Based Lending and Accounts Receivable Financing and Factoring can be an invaluable resource for service companies such as Temporary Staffing Agencies.
Unless a staffing company is established with strong cash flow and historical profits, it is usually very difficult for a bank to provide a line of credit as a majority of the assets are comprised of “soft assets” chiefly Accounts Receivable. Another issue facing staffing companies is covering their weekly payroll. If the clients pay their invoices in 30 or even 60 days, that means that the staffing company may have to cover a month or two of payroll before they receive their first payment.
At Magnolia Financial, we have extensive experience financing Temporary Staffing Agencies. With advance rates of 90% or more, we help cover payroll and bridge the cash flow gap until the client invoice is paid. We may even be able to finance earned but unbilled accounts receivable as well. The credit line increases as business grows, so our clients never have to worry about meeting payroll and can focus on finding new customers.