Flexibility in a Funding Partner

Flexibility in a Funding Partner

“It’s very important to have flexibility in a funding partner.”

“And if in fact it was a major chore for us to be able to flex our credit line and so on, then we would probably have to look for a different funding partner.” — Karl McCoy, President & Founder, ProTech Search

After some trying years, the staffing industry is starting to see the light at the end of the recession. Many staffing companies are experiencing opportunities for solid sales and strong growth. These are the start of some exciting times.

But the real question remains: does your funding source offer the flexibility you need to take advantage of these opportunities?
If your funding provider is stingy with credit, slow to expand credit limits or imposes unfavorable credit policies, it may curb your staffing company’s ability to grow.
Whether you use a traditional bank line of credit, a factor, or an asset based lender, it’s important that your funding partner is there with the resources you need — when you need them — in order to grow.
Opportunities can arise quickly, and the staffing companies that are able to capitalize on those opportunities are the ones that will see their bottom lines grow.
But seizing those opportunities isn’t always up to a staffing company owner. It may depend on your funding partner to ensure you can financially hold up your end of the agreement. That’s when the flexibility of your funding partner becomes such an integral part of your business.

The following are five criteria you can use to evaluate your funding partner (or potential funding source) when it comes to flexibility:

  1. Process for credit line increases
    With a traditional bank line of credit, it can take as many as 30 to 60 days to increase your line of credit. Oftentimes it goes through a rigorous application process, which may include line of credit increase fees. With an asset based lender who specializes in staffing, they understand how quickly needs change. In many cases, line of credit increases are automatic, or may take only a few days to approve. If the funding provider knows the staffing industry, they’ll tend to examine if the move makes good business sense versus following rigid credit rules.
  2. How they evaluate receivables
    When making decisions about your credit, does your funding provider look at your receivables as a whole, or do they examine your portfolio customer by customer? This is important because if a funding provider evaluates receivables by customer, they may try and impose a credit limit per customer. Once you’ve reached that limit with your customer, you may be out of luck in terms of funding. That can make it extremely difficult to establish a long term relationship or to grow your business with that customer.  
  3. How they help you evaluate new customers
    As a staffing company owner, you know which types of customers are a good fit for your company. Your funding partner can help you determine if they also make a good financial fit. A large contract may be a boon to your business, but it may make a traditional funding provider nervous because they don’t fully understand how staffing works. A good funding provider can help you by evaluating D&B reports and looking at a customer’s credit history and rating. This way you can be assured that new customers make good business sense.
  4. Funding under unusual circumstances
    Wouldn’t it be nice if holidays always landed on weekends? Or if critical staff were never unexpectedly ill? Or if crippling blizzards wouldn’t shut down offices? You don’t want these disruptions to have an impact on your funding. A good funding provider will work with you to make sure it doesn’t have an impact. They’ll make the necessary efforts to guarantee you have your funding when you need it, not just based on their set schedule. That becomes one less challenge you have to worry about.
  5. Turn around time for any issues regarding your funding
    When you have a request for an increased line of credit, a new customer inquiry or anything regarding your cash flow, how quickly does someone get back to you? It’s also important to look at what level these decisions are made and how accessible those people are. Nothing is more frustrating than waiting for a return phone call or confirmation email when you have a new customer waiting in the balance. You should feel like your funding provider is working for you and with you.
Anything that affects your cash flow can impact your staffing company’s ability to grow. That’s why it’s critical to make sure you have a funding partner who will help you make the most of opportunities and not stand in your way with rigid policies.