If you’re a business owner searching for the best staffing industry financing solution, there are many funding or factoring options that may work for your agency. There are even more financing partners from which to choose.
So how does a staffing business owner evaluate a potential financing partner for their staffing agency? We recommend asking several key questions to each provider and comparing responses to find a solution that addresses the needs of your staffing agency’s business model. To help you in your search, here are some of the top questions you should ask when selecting a financing solution for your staffing agency.
RATES AND CREDIT LIMIT
- What will my factoring fee be?
This should be a percentage ranging from 0.5%-5% per invoice depending on how much revenue your company generates.
- Is there a cap or maximum amount that I can fund?
If your company continues to grow, you need to avoid any potential constraints to that growth. If you don’t ask this question and the finance company caps your growth down the road, you may be unable to fund your growth and meet your clients’ expectations. This could be devastating to your business.
- Does your finance company provide services like credit research?
Prolonged default of payment from a customer remains one of the most common causes of default for a staffing agency. If your finance company does not provide credit research for your customers, how do you plan to mitigate this risk?
STRUCTURE AND FLEXIBILITY
- How will my company be funded? How often?
This is frequently overlooked as business owners research funding options. Much like an employee, if your business only received money once or twice a month, would you have enough cash flow to fund your business? Make sure your funding partner will fund your company as often as necessary to provide you with the cash flow you need to be successful.
- How will my company be charged the factoring fee?
Almost every competitive factoring company charges a discount fee on the face value of your invoice upfront. You then receive 85-95% of the invoice face value on day one. This allows you to have the cash you need to run your business. If a funding company offers a different explanation, start asking clarifying questions. If you sign an agreement that is vague with how fees are charged, what else in the agreement will be vague? This provides the funding company too much leverage to arbitrarily stifle your growth.
APPROVAL SPEED AND PROBABILITY
- How quickly can my company be approved and ready to fund?
Underwriting is a unique process to every client; however, any worthy funding company should provide you with a definitive answer within 3-5 business days. Oftentimes it will be less than 3 business days.
- How likely is it that my company will be approved for funding?
This remains a difficult question to answer without additional information. It often depends on the volume of revenue you are generating, the creditworthiness of your customers, and the speed at which you respond to requests for information from the funding company. The most successful clients are highly responsive to requests for documentation and information.
- How difficult is it to fund new customers as I generate new business?
If there is a two-week hold on funding new clients, or an unnecessarily long underwriting period for each new customer you bring on? Will you be able to fund this new business without the help of your funding company? This is the question you need to ask yourself if the funding company does not commit to funding new, approved customers within a reasonable amount of time. This should take no more than three business days.
- Does the funding company offer other benefits and services to my business?
If your business just requires cash, there are endless funding options. Most funding companies will also be able to offer several additional benefits and services. The additional offerings allow you to focus on growing your business rather than on the administrative headaches many business owners deal with. Be sure to ask each potential funding company what additional benefits they offer and make a spreadsheet comparing each company’s services. Then, determine the benefits that are most important to you and select a funding company that can help you with those services.
- What other services are offered in addition to funding?
Many funding companies also offer back office services such as payroll processing. Lone Oak Payroll offers additional services that very few other funding companies can offer. From full-suite payroll processing, tax preparation and filing services to the suite of software products we provide to our funding clients, our services allow our clients to focus on the important aspects of their business, like finding new customers and talent.
- What level of customer service have you received to this point and what should be expected moving forward?
The quality of customer service you receive is important with any interaction in business. It’s important to note if you feel you have not been treated well by a potential business partner. If this is the case, is that a company you want to entrust with the financial health of your business?
As you select the best financing solution for your staffing agency, you have many factors to consider. By answering the questions outlined above you will have the information needed to compare your financing options and to make an informed decision about the best fit for your staffing business model.
At Lone Oak Payroll, we help companies foster good financial habits through a consultative approach to partnership. Our goal is to help staffing businesses achieve their growth goals through payroll funding and comprehensive back office services. If you’d like to learn more about our financial solutions for staffing, please contact us today for more information on how our services fit with your staffing agency’s business model.