Flexibility and Personal Service Are Staffing Lender Essentials

By: James Rothman
Date: 9/1/2007

What do you look for in a financial partner? As a specialty lender focused exclusively on the staffing industry for over 14 years, I have learned one great fundamental truth: customized funding and personal service are what staffing companies thrive on. Anything less is a recipe for underachievement.

The fast paced nature of the staffing industry makes flexibility in loan structuring essential. Most banks will look to limit leverage, typically under 80 percent on the value of receivables or at multiples of three to four times debt to tangible net worth. Traditional lenders may also limit customer concentration risk, often a reality of lending to staffing companies.

By contrast, experienced specialty lenders familiar with the staffing industry are not afraid of rapid change. They understand the cycle and they understand your assets. As a result, they are comfortable leveraging at a higher level - as much as 90 percent on receivables or eight times tangible net worth. Some specialty lenders will even lend to 100 percent customer concentration under the right circumstances.

The same brisk pace of the staffing industry that requires flexibility in loan structuring also creates a need for the lender to stay on top of your financial and collateral performance. Lenders to the staffing industry bring the experience to be able to spot problems very quickly. This means closely monitoring receivables, as well as ensuring that you will be able to meet payroll, taxes and workers compensation insurance premium obligations in a timely manner. Attention to detail is crucial in the fast moving staffing world.

Handling of staffing loans also requires commitment to customer service. You best ally is a dedicated financial professional who is familiar with you and your business and has experienced up and down market trends. Look for a lender who is ready to help you move quickly to achieve objectives. Having one familiar account officer saves the "ramp-up" time of explaining who you are, what your staffing service does, and why you are requesting funding and support.

Finding an experienced financial partner that offers an immediate and expandable source of payroll funds to accommodate fast track growth is critical to staffing companies. With rapid growth potential and lack of tangible assets, staffing firms that request expandable funds from an unenlightened banker can go from welcomed borrower to credit risk almost overnight.

Specialty lenders are equipped to handle the detail required of these types of loans and have the experience to know the trends and how to react.  A number of these lenders have funding programs designed specifically for high volume staffing services that require a ready source of capital to pursue growth. These programs may range from traditional asset based style loans to quasi-factoring facilities, depending on the needs of the borrower.

The experienced staffing industry lender focuses on delivering the most important support service of all: making sure their clients have sufficient capital to grow and succeed. This is achieved by expanding lines of credit without requiring lengthy approval periods, and providing extra leverage and more flexible financial covenants tailored to the staffing industry.

Whether it is disproportionate credit lines, greater leverage, flexible financial covenants, more relaxed financial ratios, or out-of-the-box financing, the best specialty lenders are committed to custom funding that allows staffing companies to determine their own level of financing and rate of growth. By the same token, the most successful staffing firms will insist on a lender that offers multiple lending options and rate structures over a long-term transition, so they can make the right moves at the right time as their business grows.

Year in and year out, the specialty lender of most value to staffing firms is the one that provides customized ideas and solutions to fit specific company needs. In 2007, in response to client complaints about the impact of rising workers' compensation premiums, Capital TempFunds helped create a workers compensation insurance program, in conjunction with the Assurance Agency, Ltd. The program has already saved its initial group of participants over $1 million in annualized premium.

A lender that knows the staffing business inside and out, listens to your challenges, and provides the timely insights and lending options you need to achieve your business goals will be the right financial partner in every economic climate.

James Rothman is the President of Capital TempFunds, a division of Capital Business Credit. He can be contacted at 954.660.7511 or visit www.capitaltempfunds.com.