Staffing Companies benefit from factoring
Many of our clients, because of the common practices in their industries, face inherent cash flow challenges that make growth very difficult, if not impossible, without financing assistance. Temporary staffing is one such industry.
Staffing companies are usually responsible for paying contractors’ wages directly, and then must wait for repayment by their clients. What happens is reflected below:
ABC Staffing Company hires David as a contractor to work for CDE Corp and submits an invoice to CDE for its fee and David’s first payment. Two weeks after starting work, David submits his timesheet and invoice to ABC Staffing, which must pay David in 15 days. However, ABC Staffing does not receive payment from CDE Corp for 45 or perhaps even longer, but it has to lay out David’s salary for 15-30 days.
Traditionally, staffing companies have relied on factoring to help bridge this cash flow gap. Receiving cash within 24 hours of generating an invoice can spell the difference between success and failure for many staffing companies.
An IT staffing company in Ontario began factoring invoices with money on Tap Inc (MOT) in 2005, and the owner says it has been a critical factor in the company’s 7 successful years in business. “We can have as many as 9 -12 contractors out in the field at one time, and at $75 an hour, the payroll can add up quickly,” says the owner. “We are so appreciative of the service received from our factor in doing the wait for us since our first day in business.”
The owner explains that he receives 85 % of the gross invoices he sends to his clients the very next day from the factor, and the balance (less the factoring fee) when the factor collects from the client. “It’s hard to beat that,” says the owner. “Factoring covers the cash flow gap so I don’t have to pay contractors’ wages out of my own pocket.”
“Factoring is very common in the staffing industry, and it’s not unusual for staffing companies to view factoring as a long-term financing solution,” notes MOT President, Martin Charney has been a catalyst in the growth and success of this company since day one.”
The owner says other financing companies have tried to lure him away over the years, “but I have remained loyal to MOT because they have been with us since the very beginning. They took a chance on us when we were brand new.”
“Factoring has always been the best financing option for us,” he continues. “We’ve never borrowed any money for the business, and we’ve been profitable every year since we started except one. If it’s not broken, there’s no need to try to fix it.”
Klausen says this client has referred other companies to MOT over the years. “They’ve been very pleased with factoring and the service MOT has provided, and we’re thrilled to be able to help contribute to their success.”
To learn more about MOT and the financing options we can provide to clients, please visit www.ifactoring.ca or call Martin Charney at (416) 524 5518 or 1800 656 ifac