Banks consider a company’s ability to repay a loan based on its historic earnings cash flow. Now let’s analyze this situation from a banker’s perspective. This situation is quite common in the nurse staffing world because business owners are expected to invoice and make payroll on a weekly basis while the medical facilities they staff regularly can take up to three months to pay for those shifts. The agency might have enough money to recruit nurses to fill the demand, but it might not have enough readily available cash to pay their nurses once they have completed their shifts. For example, a temporary staffing company may have landed a contract with the area’s biggest hospital, and they need to hire and staff an additional 20 nurses immediately. As long as the client is staffing nurses in good paying medical facilities, and the factor is comfortable that they will get paid for the invoices that they buy, the actual agency’s credit becomes a minute detail in the grand scheme of things.Īs I said previously, another time when nurse staffing agencies find themselves in need of cash is during a rapid growth period. Nurse staffing factoring firms see a different picture when investigating the credit-worthiness of their clients’ customers. For starters, factors consider the quality of a company’s accounts (the credit-worthiness of their customers and the validity of their invoices) which allow them to provide funding even when the company is new. Once again, some nurse staffing factoring companies have a different approach to funding new businesses and are not so easily swayed by the fact that they are just opening their doors. Moreover, banks traditionally will not consider loaning money or extending credit to companies who have been in business for fewer than three years because of the high failure rate for new businesses. Temporary nurse staffing companies who are just starting out have no financial history, which is viewed by a bank as just as risky as having a bad one. The second area that could prevent a new staffing agency from obtaining a business loan is that banks provide loans on the basis of a company’s historical financial performance rather than its potential for success. In the event that a staffing agency was to go out of business, a factor can continue to collect on invoices that were issued previous to their closing up shop. Rather than loaning money, factors provide cash based on the quality and liquidity of a staffing agency’s assets, specifically their accounts receivable. On the other hand, there are some nurse staffing factoring firms that are willing and able to work with startup companies. In fact, the company’s primary asset is its accounts receivables, which unfortunately is not concrete enough for a bank because those can disappear quickly and without notice.īanks look for assets that are more tangible such as real estate, machinery or equipment-something physical that they can place a lien on wherever it goes so that in the event of default, the bank can still lay claim to and liquidate that collateral. First of all, a startup staffing company does not have any tangible assets with which to secure a loan. When a nurse staffing business is just starting out, it lacks two vital attributes for a bank to consider it as a good loan candidate. On the contrary, to some factors both of these situations might sound very appealing, and this article explains why. To a bank looking at a loan application, neither situation is attractive. The first is when the agency is just starting out, and the second is when it hits a period of rapid growth. There are two instances when a temporary nurse staffing agency could encounter a bit of a cash flow crisis.
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