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Staffing agencies, also known as temp agencies, may often suffer from cash flow problems. These issues arise from their steep expenses: paying their employees, paying dues such as rent, or purchasing supplies.

They are not paid by their clients until they fill the vacancies the clients have, and until the people they have sent have completed the work assigned to them. The staffing agencies are also expected to pay for the costs of advertising the jobs the client is offering.

To balance all these costs with no cash at hand leaves these agencies with two choices. To apply for loans, or to try invoice factoring. Loans are not always granted…so invoice factoring is their best option.

Here’s how invoice factoring works for staffing agencies:

4 Ways Invoice Factoring Works for Staffing Agencies

Create an Account with a Factoring Company

As a staffing agency, you need a good factoring company that understands your type of businesses and clients, and one that has good terms and payment options.

Once you have selected your company, you need to create an account with them; this only requires completing a few documents, and providing some original credential documents. It takes only 2-3 days to have your account set up.

Selling the Invoice to the Factor

You need to issue your clients invoices and ensure they agree to pay within 90 days; you can now sell these invoices to your factoring company. They determine if your clients are able to pay, and if you are an agency to be trusted.

If the factor approves, you sign an agreement which stipulates the highest amount of money you can be paid at any time.

Advance is Paid by the Factor

The factor gives you an advance rate, which is usually 80%, depending on your individual agreement, your business, and other considerations. The factor then sends a notice of assignment to your clients, to make them aware that their payments are collected by the factor from then henceforth.

You can then get your money deposited in the bank, but note that this can take a few days to clear. If you need the money immediately, go for direct wiring, which only takes one day.

Payment to the Factor

When time is due for payment, the client makes payment to the factor. The factor then gives you the rest of the amount remaining from the initial advance, known as the rebate. Some factoring companies give you the rebate immediately after your client has paid them, while others hold onto that amount and distribute it in certain amounts following a schedule.

Invoice factoring is a good option, even for agencies that only face cash crisis rarely, to avoid the stress of applying for loans.

Initially, working with a factoring company could take time to get the money, due to the account start-up procedures. However, once the relationship is established, you can usually get your money in a few hours.

Contact us to find out more information about Invoice Factoring and how it can help your agency.