The Growth Game - Edition 2

First off, thank you!? What an overwhelming response with over 500 subscribers to the newsletter in week 1!??

The number one question I had?? “Paul, tell me more about what you do.”??

So, upon request, here goes!

Would you believe it if I told you that our solution, Payroll Funding, has been around since the ancient Mesopotamian times and the code of Hammurabi. Introducing the age-old concept known as invoice factoring.? Today, I’m going to break down the complete history, and I promise you, it’s a lot more interesting than one might think!

First, let’s look at the broader definition of Invoice Factoring.??

WHAT IS INVOICE FACTORING?

The concept of factoring is a millennia old practice many businesses utilize to gain access to cash flow across industries and around the world. Invoice factoring allows a business to grow and unlock cash that is tied up in future collected income, so that it can re-invest that capital now.

Thus, there is a removal of the unpredictable nature of waiting for payment in order for revenue to be booked and capital available to spend.?

Ah, capitalism!

Well, sort of.? Read this below, and think about it.??

“Banks look primarily in the rear view mirror with respect to a client’s financial performance, whereas a factoring company looks at the opportunities in the future.”

Historically, Staffing Companies have resorted to maintaining cash flow from their own pockets in order to place new employees and grow their footprint for placement within their client base. Utilization of traditional banking has proven tenuous and slow resulting in lost opportunities for what is in essence an assault on opportunity assets.?

Simply put, Instead of waiting for the first invoice to be paid, you get paid now.?

There is a cost, and we will break that down in the most simple form below.?

You need $80 to pay your employees this Friday.? Plus you need some extra to pay your other expenses.??

You just billed your client $100 on Wednesday, but you won’t collect that for another 30 days.

So, I give you $90 that you need this week, and I will wait to be paid when your client pays.

When your client pays, I take out $2 for my take and you keep your $98.

Simple, and it works.? The best part, you can literally grow in an unlimited growth trajectory and never run out of cash.??

Make sense?

Because today, I see a lot of Staffing Companies where it looks like this….

FACTORING VS. BANKS

The factoring process is much easier than working with a bank as it doesn’t create debt when clients use their own company’s assets to do business.

In most cases, banks are uncomfortable financing fast growing small and medium-sized businesses, especially staffing companies. They feel growth paints uncertainty for future financial performance. Banks typically prefer to finance companies with predictable earnings, steady cash flow and manageable growth rates, while factors often look past those issues and provide financing based on the quality of a client’s accounts receivable and overall account debtors. Earnings, cash flow and growth rates don’t present a roadblock for a factoring business if it can get comfortable with the overall collateral and customer base of the customer.

Traditionally banks made it challenging to secure additional working capital via cumbersome time consumptive loan procedures. Banks may turn down requests for capital ?which generally don’t affect our decisions.?

There are multiple factors that a bank considers when you apply for a loan

1. Lack of consistent cash flow
2. Insufficient Collateral (Conventional loans require viable piece of collateral)
3. Debt to Income Ratio (Banks wary about lending clients with existing debt)
4. Concentration of existing clients with little diversity (Lack diversity in business type)
5. Insufficient Credit (Hangover from Covid)
6. Personal guarantees from bank (Personally responsible for loan)
7. Insufficient Operating history
8. Macro Economic Issues
9. Weakening Industry (Signs of industry turndown)

The bottom line, our product is the perfect solution for growing staffing companies.

YOUR CALL TO ACTION

The Growth Game Podcast is rolling!

We are now 10 guests deep with 10 more on deck!?

We had an amazing episode recently with Barry Asin , Chief Analyst at Staffing Industry Analysts, also known as SIA.

Check out the episode here!

We are hitting the road this week, out seeing clients and talking with the true leaders of today and tomorrow in the Staffing Industry!? Let me know what you’d like to hear in the next Growth Game newsletter, and if you’d like to come on the podcast just drop me a line!

Best,

Paul