Financing and working capital can help staffing companies and temp agencies stay competitive in today’s economy. As the owner of a staffing or temp agency, you know that employee payroll is your most significant expense—but you’re often left waiting for client payments. Staffing company financing can help you focus on your passion: finding the right person for your clients’ jobs.
How Can Staffing Funding Help?
As your agency grows, you may need to bring on more talent or extend payment terms for new clients. Loans for staffing agencies can help give you the working capital to continue building your business.
Cover Employee Expenses
Because your clients may take anywhere between 30-90 days to pay invoices, you need to cover your employees’ salaries before you get paid. You also need to have enough money to pay for employment taxes.
Payroll funding for staffing companies helps you protect the core of your business—the talent you offer your clients. If employees aren’t paid regularly or on time, they’ll work elsewhere.
Market Your Services
Whether you’re building your client roster or looking for fresh talent, you need to market your agency. You could use a temp agency loan to cover investments such as an improved website or pricey registrations for worthwhile networking events within your niche.
Meet Client Needs
Landing a large client is an exciting time for any staffing company. Temp agency funding can give you the financial freedom to meet your clients’ expectations—whether that means hiring more employees or extending their payment windows.
Keep Operations Moving
Staffing company financing can also come in handy during slow seasons. Beyond making payroll, you need to have the cash flow to pay for other expenses such as rent, utilities, insurance and vendor fees.
Best Options for Temp Agency Funding
Let’s review how to get funding for your staffing or temp agency. Keep in mind, funding companies for staffing agencies may have a wide range of requirements specific to revenue, credit score and time in business.
Invoice Financing
Because of the nature of the business, invoice financing is a popular option for staffing or temp agency funding. Also known as accounts receivable financing, this type of funding allows you to access money already owed to you instead of incurring debt.
Invoice financing for staffing agencies is based on the quality of invoices, the likelihood invoices will be paid and your customers’ creditworthiness rather than your own credit score. This enables lenders to make financing decisions quickly, so you can receive your funding the same day you apply.
Through invoice financing, your staffing business will receive an advance of the invoice value—typically in the range of 70-80%. The cost of this type of funding will depend on the time it takes your clients to pay their invoices.
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Is Invoice Financing the Same as Invoice Factoring?
Both invoice financing and factoring involve a third-party lender. But with invoice factoring, the lender purchases your invoices and assumes the responsibility for collecting payments.
Invoice factoring requires that your customers pay your lender directly. Invoice financing is the better option if you want to maintain control of payment collection and customer communications.
Merchant Cash Advances
Need a financing option that offers your agency both speed and flexibility? A merchant cash advance (MCA) can provide you with funds based on your company’s expected revenue and cash flow.
MCAs have the most flexible qualifications, and funds can be made available as soon as the day of approval. Smaller repayments are made daily or weekly over 3-18 months.
Lines of Credit
With a business line of credit, you don’t have to use all the funds you’ve been approved for at once, and you’ll only accrue interest for what you spend. As you pay off your debt, the credit line is restored up to its original limit.
You have the choice to apply for an unsecured line of credit, or use assets such as accounts receivable as collateral for a secured credit line. Each option has its benefits and drawbacks. Typically, the minimum credit score requirement to obtain a business credit line is 560.
Business Term Loans
A short-term business loan provides your staffing agency with upfront working capital that is then paid back in 18 months or less. This loan option can help you invest in a new marketing campaign, cover operational expenses or add employees by bearing the upfront costs of hiring.
Generally, you need a minimum credit score of 600 to qualify for a business term loan. Funds for a short-term loan can be issued in as little as a day.
Where to Find Temp and Staffing Agency Loans
Traditionally, banks are the first stop for business owners looking to secure funds. But despite their competitive terms and repayment options, banks and credit unions tend to have lengthy loan processes. This isn’t ideal if your agency needs financing fast—especially when employees are expecting their paychecks.
Online lenders and marketplaces fill the void left by conventional banks with lower qualification thresholds and rapid funding that provides you with fast capital. The difference means getting a loan for your business in hours instead of weeks.
