Some temporary staffing services, especially when contracting or working directly with other businesses might have cash flow gaps that can cripple a business. For those companies offering highly qualified and talented IT professionals, using IT staffing factoring can address the financial squeeze that can occur because of that gap.
Most temporary staffing services pay their professionals on a weekly or bi-weekly basis. However, invoices typically are paid on thirty, sixty or ninety days, leaving the staffing company to try to come up with payroll for up to three months without the income from pending invoices.
With IT staffing factoring, this issue can be completely eliminated within just days. This allows the staffing company to pay for advertising to make their services known, as well as to actually pay their staff. They may also need to pay for office space, cover the materials needed to run the office, and to also pay their office and placement staff.
The Loan Option
For temp agencies that don’t know about IT staffing factoring, their only option may be to go through the bank. However, since their assets for their business are their workers, collateral for a loan can be very difficult to generate. In addition, bank loans involve a long application process and, in many cases, denial of the loan if the company doesn’t have a top credit score and business rating.
In some situations, the business owner or owners may be required to provide a personal guarantee for a bank loan. This can cause complications in mingling personal and business finances, and can have significant long-term financial risks.
The IT Staffing Factoring Option
The IT staffing factoring option is very different than a loan. Instead, the temporary agency sells the account receivables they choose to a factoring company. The factoring company then approves the application request within 24 hours, and funding up to a percentage of the value of the accounts receivables is provided to the agency within a matter of a few days.
This funding is then available for the temp agency to pay their IT professionals, keep the business doors open, advertise to new companies and even to bring on new staff. As it isn’t a loan, there is no interest to repay, and no need for a personal guarantee. The only fees will be a pre-set rate based on the value of the account receivable.
With IT staffing factoring, there is no need to go through a bank, take out a loan, and have to struggle with making payments. Instead, cash can be available in a few days, allowing you to run your company and have the factoring company handle collections and final payment when the invoice is paid in full.
