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Agricultural staffing factoring is a reliable and quick source of funding for staffing businesses running short of cash due to slow-paying customers. Long pay cycles can be another reason for cash flow issues, but a 30-day to 90-day pay cycle is considered the norm in the staffing industry. Ultimately, the late-paying customers often create gaps in cash flows.
Staffing factoring for agricultural companies can bridge cash flow gaps and ensure that a business has working capital to cover payroll, operating expenses, and the costs associated with hiring, training, and onboarding new workers.
With agricultural staffing factoring, a third-party company (known as the factoring company or factor) buys the staffing agency’s invoices for a small fee (which is included in the discounted rate). In two to three business days, the factoring company pays the staffing agency as much as 96 percent of the outstanding invoice (known as the advance rate). The remaining 4 percent is then set aside as the reserve, which is a deposit that the staffing agency can get back once the client settles the invoice.
Factoring companies can buy a few invoices via spot factoring or buy all of a staffing company’s outstanding invoices through whole-ledger or full-turn factoring.
It’s easy to apply for staffing factoring for agricultural staffing companies. There are only four steps:
Step 1: Contact the factoring company and provide them with a copy of the unpaid invoice you sent to your customer.
Step 2: The factoring company verifies the accounts receivables and runs credit checks on your customer.
Step 3: If the factoring company is satisfied with its screening, they will pay your advance in the next few days.
Step 4: Once your customer pays the invoice, the factoring company will pay you back the reserve minus the discount rate and other fees.
Agricultural staffing companies enduring the impact of a wide pay cycle gap can seek financial relief through staffing factoring. It is the ideal solution for cash flow problems because it converts unpaid invoices into working capital. You get financial relief as a result, and since the advance from a factored invoice is not a loan, you are not in debt. For this reason, agricultural staffing factoring is a lifeline for staffing companies that urgently need working capital but cannot commit future earnings into paying loans.
Factoring is also helpful to staffing businesses with low credit scores or short credit histories. Unlike business loans for which lenders require high credit scores, invoice factoring doesn’t require a high credit rating because factoring companies are more interested in your customer’s creditworthiness, not yours.
Factoring is most helpful to agricultural staffing companies that can’t get approved for regular loans because of low credit scores. It is also a practical choice if your cash flow is short, but you have unpaid invoices that can cover your financial obligations.
Why choose staffing factoring to solve your cash shortage problem? It offers advantages you may not find elsewhere. Below are some examples:
- You can receive working capital even if you have a low credit rating or are in a revenue slump.
- You can afford to accept new customers while serving all of your current accounts.
- You can afford to hire seasonal employees and attract top talent whenever your customers need them.
- You can finance business expansion plans without being in debt.
- It is no longer your burden to follow up on customers who are late in paying their invoices.
The cost of staffing factoring for agricultural staffing companies boils down to the discount rate and other fees. Factoring companies determine the discount rate based on the debtor’s credit history and the amount on the invoice. If you factored multiple accounts receivables, the volume could also affect the final discount rate.
After your factoring company decides on the discount rate, they can then determine the reserve, which is like a deposit that you can get back after the invoice is paid, and the advance rate. The discount rate is always lower than the reserve because, theoretically, the factoring company would deduct their fees from the reserve and then pay you back the remaining balance.
A staffing factoring agreement can look like this:
- Invoice amount: $10,000
- Advance rate: 90% or $9,000
- Reserve: 10%, or $1,000
- Discount rate: 2.19%, or $219 every 30 days
- Type of arrangement: Non-recourse
Based on this example, you, the business owner, will receive $9,000 in advance from the factoring company. You will also be obliged to pay the factor $219 a month until your customer pays their $10,000 bill. If they settle their invoice after one month, you only need to pay your factoring company $219. The factoring company, in return, will deduct the discount rate from the reserve and then send you back the remaining balance of $781.
In a non-recourse agreement like this one, the factoring company absorbs the losses and will not charge you extra fees if your customer ends up not paying their debt.
If you are considering other financing options besides factoring, you can check the working capital loans we offer here at Business Factors. We provide asset-based financing, revenue-based loans, purchase order financing, and cash flow loans. Each of these addresses specific business financing needs. We can help you determine which ones will serve your business best. Get in touch so that we can schedule a meeting to discuss your financing options.
What makes Business Factors the best factoring company for agricultural staffing agencies? Take a look at what makes us the superior choice for staffing factoring:
- We can send the advance to your invoices in just two to three days.
- We offer competitive fees and some of the highest advance rates in the industry (up to 96 percent for staffing companies).
- We provide an online account management system that tracks the status of the accounts receivables factored with our company.
- We offer professional assistance for back-office receivables and invoice handling.
- Our professional and friendly staff can answer your concerns 24/7.
Agricultural staffing factoring solves many pain points for staffing companies in the agricultural sector. Dealing with cash flow gaps, checking up on late-paying customers, finding funds to make payroll on time, and paying minimums to suppliers and service providers when cash is short all cause so much stress and are ultimately red flags for your business. You don’t want to be dealing with these problems frequently. But while you strategize and explore long-term solutions, you can get immediate cash flow relief from agricultural staffing factoring.
Selling your unpaid invoices monetizes them instead of creating a bubble in your financial ledgers. Rather than waiting for 30 to 90 days for a customer to pay, you can advance up to 96 percent of your invoices and use the inflow to fund projects and processes that can grow your business.
At Business Factors, you also benefit from non-recourse factoring, which shifts the risk of non-payment from your business to ours. We also provide a full range of financial services, so we have you covered if you need other forms of financing. Contact us today, and our friendly staff will help you find the best financing option for your business.