| With ever-increasing revenues, one may find it difficult | | | | Accounts Receivables Funding |
| to fathom how a growing company can encounter | | | | Receivables funding, often referred to as factoring, is |
| cash flow issues. For Employment Plus, a privately | | | | more flexible and quicker than a traditional bank loan. |
| held, Bloomington, Ind.-based staffing company, | | | | "We've been working with a receivables funder for the |
| however, the more than 400 percent sales increase in | | | | past four years, and the level of responsiveness and |
| four years brought on a new set of growing pains, one | | | | receptivity is fantastic," said Testy. "We had a $4 |
| that many young, thriving firms experience. | | | | million funding facility since October 2005, but at that |
| Just five years ago, Employment Plus reported | | | | time, many of our clients were hiring more temporary |
| revenue of $11 million by providing local companies | | | | staff, so we knew our payroll obligations would |
| temporary employees from six locations in south | | | | increase." Based on Employment Plus's client portfolio, |
| central Indiana. This year the company operates 16 | | | | this credit line was increased to $5 million, and it has |
| branches in Indiana and Kentucky and projects 2006 | | | | since increased to $10 million. |
| billings to total more than $53 million. | | | | Studies show that using non-bank sources such as |
| Most banks will not lend money to companies in such | | | | factoring for financing is not uncommon. The Federal |
| a growth mode. Even human resource solutions firms | | | | Reserve released statistics in October 2006 that |
| such as Employment Plus, which has an impressive | | | | show a strong increase in the number of small |
| portfolio of clients and a history of good service over | | | | businesses seeking funding from these sources. |
| the past 14 years, may not qualify. Often high growth | | | | "Between 1998 and 2003, the incidence of |
| businesses must turn to accounts receivable funding | | | | non-depository use by small firms increased from 40 |
| sources for their cash flow needs. | | | | percent to 54 percent," according to a summary of |
| Receivables funding has allowed Employment Plus to | | | | the survey. In 1987 that number was 25 percent. |
| thrive as it has done the past several years. "We have | | | | Using factoring has additional benefits for Employment |
| weekly payroll obligations," said Mike Testy, vice | | | | Plus. "When we do have a new large-volume client, |
| president of finance and administration for Employment | | | | our receivables funder works with us on the front lines |
| Plus. "And even though we invoice our clientsthose | | | | to assess the creditworthiness of the business," added |
| who need temporary employeeson a weekly basis, | | | | Testy. |
| most on average do not pay for 37 days." | | | | Employment Plus's growth has not gone unnoticed. |
| A burgeoning payroll isn't the only financial obligation for | | | | The Sept. 29, 2006, issue of the Staffing Industry |
| an expanding company like Employment Plus. From | | | | Report ranked Employment Plus 11th in its list of |
| real estate costs to tax obligations and IT equipment | | | | "America's Fastest Growing Private Staffing |
| acquisition, cash flow funding solutions are key | | | | Companies." |
| elements that some lenders cannot or will not provide. | | | | Factoring is also growing, helping companies like |
| Accounts receivables or factoring companies assess | | | | Employment Plus meet their financial obligations. |
| their client's credit based primarily on their invoices and | | | | Because of peaks and valleys in the temporary |
| provide them the cash flow they need to continue their | | | | personnel needs of companies, staffing firms can |
| expansion efforts and meet day-to-day business | | | | benefit greatly from the cash flow funding of factors. |
| expenses. | | | | |