Staffing factoring (aka citizenship factoring) is a financing tool for staffing agencies that converts outstanding invoices into immediate working capital. Staffing factoring companies typically advance 85-90percent of a statement value immediately. The remaining balance will be provided to the staffing service, minus the variable’s fees, after the client has paid the bill in full.
Staffing agencies searching for a factoring partner might want to think about altLINE. They don’t have any hidden fees, prices between 0.5% — 5 percent, and can work with businesses invoicing at $30K per month. You can pre-qualify online in minutes.
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What’s Factoring Is
Staffing factoring is a form of funding that converts outstanding invoices into immediate cash. Factoring is different from taking out a term loan or line of credit in which you make no obligations . You only sell your receivables at a discount to a factor. Your client pays their invoice like normal, except they forwards the payment to the factor rather than your AR department.
Because you’re promoting your unpaid invoices, the staffing factoring company assumes the responsibility for collecting about the invoices. Many agencies see that shift in charging responsibilities to be just another perk of payroll factoring and it is essentially a way to outsource their accounts receivable department. Doing so let’s them remain lean and clean up their cash flow.
Staffing factoring is commonly used by:
- General staffing agencies
- IT staffing agencies
- Temp bureaus
- Healthcare staffing firms
- HR consulting companies
- Headhunters
- And more…
For the staffing industry, payroll factoring has increasingly become an important lifeline. Agencies typically aren’t paid until placements are on the job for two weeks, and occasionally 3 months for executives! In fact, at 2013 the average bill was paid in 35 days, but today it’s as large as 90 days. That’s a long time to wait for the cash you need to conduct your business.
This issue can hurt agencies seeking to put contract workers, or temp workers, into a different business. They will normally give 30-90 day terms to the company they’re working together, but still need to cover these employees in the meantime. However, it may also hurt big executive recruiting companies who often work on a small retainer before they know if they will be compensated.
“Recruiting companies which are using a direct hire model will not have the continuing payroll obligation of a staffing agency, which can make managing cash flow simpler. However they are not without their own struggles. By way of example, usually, the recruiters will be working on commission only. In certain markets (or for people placing executive level talent), they may have the ability to negotiate getting a retainer as well as their commission. However, considering that commissions are reliant upon a thriving 90-day (or longer) trial period, that can mean having to float your business to a 5-10percent retainer before understanding you have secured the 30-40percent commission. If you provided net-terms, locking the position might only start the clock on the 30-90 day terms you extended. That’s often further than a 5 percent commission can elongate .”
— Christy Hopkins, Owner & Principal Consultant at HR Consulting and Recruiting firm 4 Point Consulting
Staffing Leasing is a solution which can help the two these kinds of staffing companies find the help they need to overcome their short-term cash flow gaps, should they have a bonded invoice. By way of example, some executive companies may not be able to use staffing lien until once they’ve put an employee, but all of temp agencies are going to have the ability to use a staffing factoring product as soon as they set workers. In any event, staffing factoring has become a lifeline for the industry to help them maintain their costs in check while they await their customers to pay.
You can start the application process and begin using staffing factoring as a way to overcome your short-term cash flow interruptions. To get 0.5% — 5 percent, altLINE may turn unpaid invoices into cash fast. Whether your customer will cover you in 10 days or 90, altLINE can help you stay away from cash flow crunches by paying you within 24 hours, even once you’re approved. Get pre-qualified online and accepted in a couple of days.
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Staffing Factoring Rates, Terms, & Qualifications
As with all invoice factoring, obtaining the best rates and terms depends not only on the volume of invoices you are factoring and how creditworthy your clients are, but also how familiar the Factor is with your industry.
Let us take a look at typical rates, terms, and qualifications for citizenship factoring at the table below, then dive into the details.
Staffing Factoring Rates & Conditions at a Glance
| Amount You Can Borrow | $30K – $20 Million a month |
| Advance Rate | ~ 90 percent |
| Discount Rate | 0.5 – 5 percent per statement |
| Qualifications | 2years in business Invoice B2B or B2G clients Invoices due in 30, 60, or 90 times No outstanding tax or legal issues Creditworthy customers |
| Time to Qualify | two – 7 Days |
| Funding Time | 1 Day |
| Get Started | Visit altLINE |
Staffing Factoring Qualifications
You will generally qualify for staffing factoring in the event that you have a minimum of $30K a couple of outstanding invoices which are due within 90 days, have been in business for 2years, and don’t have any serious legal or tax issues.
Your customers also have to be deemed creditworthy by your own Factor, so that they don’t have any red flags that make them a risk to not pay in time. If you have a very long history of getting timely payments from a client, then their invoices will be easily factored.
Smaller staffing companies who bill less than $30K per month may need to look at a slightly different invoice-based financing merchandise to get accepted, called accounts receivable financing.
AR financing company like, Fundbox, can qualify newer agencies (only 6 months) and will look at funding amount as little as $1k.
Staffing Factoring Costs
The Expense of factoring an invoice Will depend on two things:
- Discount Rate (0.5% — 5%):
Sometimes called your factor rate, your discount rate is the primary cost to borrowing money with your invoices. The discount rate is a proportion of the value of your bill that is billed on either a weekly or monthly basis for the period your bill is outstanding. - How Long it Takes Your Client to Pay off the Invoice:
Many larger factors have a tiered system that lowers your costs based on how much you variable each month, and how fast the bill is paid off. If you do a lot of factoring as well as your clients typically cover within 30 days then you’ll generally qualify for the lowest rates.
Furthermore, many variables frequently have other fees. Some of those fees are somewhat less obvious, making it important to completely read and comprehend that your factoring arrangement before you submit any statements. These charges can vary from an easy $12 wiring charge to an origination fee of $500.
The table below is an example of what your prices could look like once you borrow money through invoice factoring if you’re not charged any extra fees.
Staffing Factoring Costs Example
| Factored Amount | $30,000 |
| Discount Rate | 2.5percent |
| Repayment Timing | 60 Days |
| Total Cost | $750 |
Smaller firms looking to get accounts receivable funding of less than $30K per month can generally get a discount rate between 2% — 5% per month that the invoice is outstanding from an AR financing provider.
Invoice factoring is a short-term financing option, and therefore, it generally has low total cost of funding but higher APR.. This is a frequent characteristic of any brief term business financing choices. Prime borrowers with recognized companies could be able to locate lower APR products using their bank.
Staffing Factoring Repayment Terms
This is exactly what the staffing business tends to like best about factoring: there really isn’t a repayment term. At leastnot in the way there is with a business loan or line of credit. The sole payment owed is that the payment owed by your customer, and nothing has changed concerning that payment other than who they will pay.
The one caveat here is when your client fails to pay the invoice that the factor bought from you. Staffing factoring is generally recourse factoring, which means if your client gets unable to pay then the factoring company will look for you to repay the advance amount you received.
If your customer has not paid the invoice on time, the Revenue factoring company may look to request you to help get your clients to pay. After that, if they’re still unable to collect on the bill, you may be held liable for the debt. And oftentimes, you’ll have signed a personal guarantee as for of the factoring agreement.
AltLINE offers staffing factoring with competitive rates as low as 0.5%, depending on how much you factor per month and just how fast your clients pay off your bills. They can qualify you in as little as 2 days, and finance you within a day of being accepted.
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How Payroll Factoring Works
Staffing factoring functions like conventional invoice factoring by financing you upfront for your unpaid customer invoices. Unlike with traditional term loans, or LOCs, you don’t have to make any payments to your Factor. Your Factor will advance you around 90 percent of your invoice’s worth, and pay you the remaining 10% as soon as your customer pays, minus the Variable’s fees.
There are traditionally 5 steps in bill factoring, which are:
- Invoice Your Client (Owed Within 90 Days)
- Assign the Invoice to the Factor
- The Factor Pays You an Advance (Up To 90 percent of Invoice’s Worth )
- Your Client Pays the Invoice Directly to Your Factor
- The Factor Requires Their Interest and Forwards You the Balance
Benefits of Staffing Factoring
On account of the wide variety of positions recruited for and businesses served, an agency’s invoices may be paid at unpredictable times. This can make managing an agency’s cash flow very hard. Payroll factoring can help staffing agencies conquer their cash flow management problems.
Staffing factoring benefits include:
- Get Paid Quickly: Once you’ve been approved for any kind of invoice factoring, you’ll typically get your funds within 24 hours of assigning a statement.
- Take on New Customers: Some firms will need to get paid on their prior work before they can afford the costs of new clients. Staffing factoring solves this difficulty by not having to wait for your clients to pay before you get paid.
- Concentrate on Growing Your Company: Bigger factoring firms can use invoice factoring as a means to completely outsource their accounts receivable procedure. This could save time which can then be refocused on developing your business.
- Have Predictable Cash Flow: Service businesses tend to have an unpredictable cash flow cycle due to the unknown of when their clients will pay bills. Factoring all your invoices will give you the knowledge of exactly how much cash you are getting and if.
- Offer Competitive Salaries to Clients: Many temp agencies find themselves with no cash needed to cover temporary employees, that they need to hire directly, a competitive wage. Better cash flow can make offering competitive salaries simpler to perform.
If you are ready to factor your invoices for your staffing firm, there is no one we urge over altLINE. They are experienced at the staffing service, and are familiar with how your payments and contracts get the job done. They provide prices as low as 0.5%, and will finance within 24 hours of an invoice being delegated.
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Staffing Factoring vs AR Financing
Staffing factoring is usually likely to come from large banking institutions that are wanting to associate with firms looking to factor a minimum of $30K-$50K per month. If you presently have a strong banking relationship with a large national or regional bank, ask them if they offer factoring services. If they do, then they may be able to give you the strongest prices and terms since they’re already familiar with your business.
Smaller staffing agencies or those that are relatively new can generally find the right accounts receivable financing firm on the internet. Firms like Fundbox and BlueVine will satisfy the requirements of small to moderate sized companies looking to perform less receivables financing than what a bank will accept.
Let us take a look at the comparison between the 2 forms of staffing factoring firms and what their usual provisions look like. We will examine our recommended staffing factoring company, altLINE and our recommended online AR financing provider, Fundbox.
Staffing Factoring vs AR Financing at a Glance
| Â | Staffing Factoring | AR Financing |
|---|---|---|
| Best For | Larger Businesses | Smaller Firms |
| Funding Amount | $30K – $5 Million | $1K – $100K |
| Advance Rate | 90% | 100% |
| Discount Rate | 0.5% – 5% | 0.5% – 0.7% weekly |
| Qualifications | 2+ Years in company Creditworthy clients Invoice B2B or B2G clients No outstanding legal or tax issues |
6+ Months in company Creditworthy customers |
| Repayment Conditions | Customer pays variable by bill’s due date (30-90 days) |
You cover funding company per week for 12 or 24 Weeks |
| Get Started | Visit altLINE | Visit Fundbox |
To look at what more staffing factoring firms have to offer you can check out our articles on the best invoice factoring companies as well as the best accounts receivable financing businesses.
Staffing Factoring vs Short-Term Loans
Another financing option for staffing agencies will be a short-term small business loan. The table below demonstrates the simple comparison between getting staffing Leasing through altLINE and getting a brief term loan from our recommended supplier, OnDeck.
Staffing Factoring vs Short Term Business Loans at a Glance
| Â | Staffing Factoring | Short-Term Loan |
|---|---|---|
| Finest For | Big companies doing a Great Deal of invoices. |
Businesses which don’t bill as much. |
| Funding Amount | $30K – $5 Million | $5K – $500K |
| Advance Rate | 90 percent | Full amount of loan is disbursed at closing. |
| Cost | 0.5% – 5% per statement | 30-50% APR |
| Qualification | 2Years in business Invoice B2B or B2G customers $30K+ Monthly Invoicing Creditworthy clients |
12+ months in company 500+ Credit score (check yours for free) $100K+ Annual Revenue |
| Repayment Conditions | Customer pays factor by bills due date. (30-90 days) |
You pay loan supplier either weekly or daily. (1-36 months) |
| Get Started | Visit altLINE | Visit OnDeck |
Bottom Line
Staffing factoring can help staffing agencies of all sizes overcome short-term cash flow interruptions by obtaining paid for bills up front with no worry of when the bill will be paid. Small businesses, doing less than $30K of invoiced company per month, should look at using an online AR financing company like Fundbox. Larger agencies should consider using our experienced staffing factoring provider, altLINE.
AltLINE is a leading invoice factoring company with a great deal of experience in the staffing industry. They supply rates between 0.5% — 5 percent, based on how far you factor per month and just how quickly your invoices are repaid. You are able to get accepted in 2-7 days and funded within 24 hours after that.
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