| There are two instances when a temporary nurse | | | | comfortable that they will get paid for the invoices that |
| staffing agency could encounter a bit of a cash flow | | | | they buy, the actual agency's credit becomes a minute |
| crisis. The first is when the agency is just starting out, | | | | detail in the grand scheme of things. |
| and the second is when it hits a period of rapid growth. | | | | As I said previously, another time when nurse staffing |
| To a bank looking at a loan application, neither situation | | | | agencies find themselves in need of cash is during a |
| is attractive. On the contrary, to some factors both of | | | | rapid growth period. For example, a temporary staffing |
| these situations might sound very appealing, and this | | | | company may have landed a contract with the area's |
| article explains why. | | | | biggest hospital, and they need to hire and staff an |
| When a nurse staffing business is just starting out, it | | | | additional 20 nurses immediately. The agency might |
| lacks two vital attributes for a bank to consider it as a | | | | have enough money to recruit nurses to fill the |
| good loan candidate. First of all, a startup staffing | | | | demand, but it might not have enough readily available |
| company does not have any tangible assets with | | | | cash to pay their nurses once they have completed |
| which to secure a loan. In fact, the company's primary | | | | their shifts. This situation is quite common in the nurse |
| asset is its accounts receivables, which unfortunately is | | | | staffing world because business owners are expected |
| not concrete enough for a bank because those can | | | | to invoice and make payroll on a weekly basis while |
| disappear quickly and without notice. Banks look for | | | | the medical facilities they staff regularly can take up to |
| assets that are more tangible such as real estate, | | | | three months to pay for those shifts. |
| machinery or equipment-something physical that they | | | | Now let's analyze this situation from a banker's |
| can place a lien on wherever it goes so that in the | | | | perspective. Banks consider a company's ability to |
| event of default, the bank can still lay claim to and | | | | repay a loan based on its historic earnings cash flow. |
| liquidate that collateral. | | | | Unfortunately for our growing temporary staffing |
| On the other hand, there are some nurse staffing | | | | company, its previous income and cash flow is much |
| factoring firms that are willing and able to work with | | | | smaller in comparison to its increasing need for |
| startup companies. Rather than loaning money, factors | | | | financing. Sometimes a nurse staffing company's |
| provide cash based on the quality and liquidity of a | | | | previous year's income is enough to secure a bank |
| staffing agency's assets, specifically their accounts | | | | loan, that is to say, if the staffing agency wanted to |
| receivable. In the event that a staffing agency was to | | | | stay at its same operating size. More often than not, a |
| go out of business, a factor can continue to collect on | | | | staffing company goes to a bank looking for a larger |
| invoices that were issued previous to their closing up | | | | loan than what last year's earnings could justify |
| shop. | | | | because they intend to use the loan to double or triple |
| The second area that could prevent a new staffing | | | | last year's revenues. Unfortunately, a bank wouldn't |
| agency from obtaining a business loan is that banks | | | | feel comfortable loaning money to a company based |
| provide loans on the basis of a company's historical | | | | solely on its potential to grow. Once again, banks look |
| financial performance rather than its potential for | | | | at the agency's profitable operating history to justify |
| success. Temporary nurse staffing companies who | | | | lending. So the bank lending process eventually turns |
| are just starting out have no financial history, which is | | | | into a never-ending cycle-the nurse staffing company |
| viewed by a bank as just as risky as having a bad | | | | needs money to grow, but the bank needs to see a |
| one. Moreover, banks traditionally will not consider | | | | history of growth to give out money. |
| loaning money or extending credit to companies who | | | | Enter a nurse staffing factor. Though a factor will look |
| have been in business for fewer than three years | | | | into a growing nurse staffing business's operating |
| because of the high failure rate for new businesses. | | | | history, it's not a deal killer if the company doesn't have |
| Once again, some nurse staffing factoring companies | | | | a track record of high earnings because a factor is |
| have a different approach to funding new businesses | | | | generally more concerned with the future of the |
| and are not so easily swayed by the fact that they | | | | business. A good rule of thumb to remember: banks |
| are just opening their doors. For starters, factors | | | | look to a company's past to justify approving a loan, |
| consider the quality of a company's accounts (the | | | | while factors look at a company's future growth |
| credit-worthiness of their customers and the validity of | | | | potential to justify advancing cash on their invoices. |
| their invoices) which allow them to provide funding | | | | Going back to our example, the fact that the staffing |
| even when the company is new. Nurse staffing | | | | agency just signed a contract with one of the biggest |
| factoring firms see a different picture when | | | | and fastest paying hospitals in the area means nothing |
| investigating the credit-worthiness of their clients' | | | | to a bank, but it is great news for a nurse staffing |
| customers. As long as the client is staffing nurses in | | | | factoring firm. |
| good paying medical facilities, and the factor is | | | | |