How to Find the Best Factoring Company for Your Staffing Agency

Invoice Factoring Companies

Last Updated May 15, 2024

There are not many more consequential decisions a business owner can make than selecting the right funding provider. The difference between a good provider and a bad provider can truly make or break a business. That’s why choosing the right staffing agency factoring company to partner with is so critical.

If you’re reading this, there’s a good chance you already know of the benefits of staffing invoice factoring. However, the best factoring companies for staffing agencies can offer your employment agency more benefits than others can, so you shouldn’t just choose the first one you come across.

Knowing how to find the best staffing factoring company involves more than a simple Google search—it involves knowing what makes a “good” factoring company.

Before we discuss top factoring companies for staffing agencies, let’s review how a factoring company will operate once a factoring agreement is signed.

What Do Factoring Companies for Staffing Agencies Do?

Factoring companies (also called “factors”) buy outstanding accounts receivable from businesses at a discounted rate of 80-90% of the value of each invoice. This allows business owners to immediately improve cash flow and working capital.

The factoring company then assumes collection responsibilities for all the invoices they’ve bought. Once the customer is ready to pay the invoice, they submit payment to the factor via a secure lockbox.

The factoring company then collects and processes payment before releasing the remaining value of the invoice to the business (minus a small factoring fee).

Behind the scenes, factoring companies do a lot more than you might realize. Whether that’s communicating with their client’s customers to ensure payments are made smoothly or performing background checks on their client’s new customers, invoice factoring companies take a lot of accounting-related burdens off the shoulders of business owners.

With that said, let’s take a look at what criteria you should be looking for when researching staffing agency factoring companies.

How to Find Top Factoring Companies for Your Staffing Agency

Every factoring company is different. Rates, fees, and factoring agreement structures vary by company.

Keeping the following seven touchpoints in mind can help you further decipher the differences between factoring companies for staffing agencies.

1. Target Bank Factors Instead of Independent Factors

There are two types of invoice factoring companies: bank factors and independent factors.

A bank factor, such as altLINE, is FDIC-insured and federally regulated. The funds used to factor your invoices come from the bank itself.

Theoretically, anybody could start an independent factoring company. Because they aren’t tied to a financial institution, they’re far less regulated than bank factors. This also means that factoring funds must often be borrowed from outside sources. This combination of characteristics tends to mean independent factors are less reliable than bank factors.

2. Identify Factoring Companies With a Good Reputation

After you’ve whittled down your staffing agency factoring company options to bank factors, the next criterion is finding providers with top-notch reputations.

How do you do so? A good way to start is by looking into companies’ Trustpilot ratings, a platform for businesses’ customers to leave reviews for the service they’ve experienced, similar to Google Reviews.

Studies have shown that 4.1 is the average Google Review score, and it’s fair to say you should expect the same score, at minimum, for factoring companies on Trustpilot. You can find a factoring company on Trustpilot by simply searching for the provider in the top navigation menu.

Trustpilot is a great way to get a quick feel of a company’s reputation, but you should take additional precautionary steps as well. Contact other business owners who use, or have utilized, invoice factoring and ask about their experiences and opinions. If you feel unsure if your top choice is reputable or not, you should weigh the other aspects of the company, such as whether their rates seem flexible, and you can ask their representative questions regarding their years of experience and whether or not they have expertise in the staffing industry.

3. Look for Factoring Companies With Experience

While experience isn’t the be-all and end-all, it’s an important element when researching staffing factoring companies. After all, bank factors are heavily regulated and therefore must abide by strict regulations. The more experience a factoring company has, the more proof there is that they abide by those regulations, manage funds properly, and help business owners expand their operations. Plus, an experienced staffing factoring company’s employees will have had more practice in handling unexpected occurrences within the factoring process. Top factoring companies have likely seen everything, and won’t be taken by surprise. This can provide added assurance that you’re working with a partner whom you can trust if things don’t go according to standard protocol on your end or your customer’s end, for whatever reason.

altLINE has 87 years of experience providing working capital for businesses when they need it most. Whether you’re aiming to fund new contracts, fund payroll, adjust to seasonality and financial stability, or reduce the effects of slow-paying customers, factoring with altLINE can help eliminate at least one obstacle that’s preventing your business from further growth.

4. Ensure They Have Expertise in the Staffing Industry Specifically

If you’re trying to grow a staffing agency, it’s best to target providers who have experience aiding staffing agency owners with their business expansion efforts.

altLINE specializes in factoring invoices for staffing companies with years of experience helping staffing firm owners reach their growth goals.

Why is this important? Well, a factor that has a breadth of knowledge in staffing can better understand the challenges you might face as a business owner in the industry. Struggling to make payroll? We’ve worked with dozens of staffing agency owners who have been in that position and turned to altLINE to throw them a liferaft, so we can tailor to your needs and work with you to find optimal solutions.

5. Pursue Fair Rates

If you’re searching for the best factoring companies for staffing agencies and talking to various company representatives, you’re inevitably going to discover that each factor has different rates, even if these variances are very small.

There’s not necessarily an exact “industry standard” when it comes to factoring rates and fees. However, fees will almost always range within 1-5% of the value of each invoice.

The difference between 1% and 5% will obviously prove substantial over time as you continue to factor more and more of your ledger. The exact figure depends on aspects such as the length of the payment terms of invoices you’ll be factoring and your clients’ creditworthiness and payment habits.

Regardless, you should also expect transparency from a factoring company when it comes to the fees you’re to expect.

With all this being said, you shouldn’t simply assume the best staffing factoring company is the one with the lowest rates. For instance, an independent factor with no experience might offer lower rates than a proven, regulated bank factor with better customer service, ultimately one that could be a better partner for your business in the long term.

6. Prioritize Flexibility

Asking questions about hypotheticals is an important part of the decision-making process when choosing between providers. It will provide insight into each factoring company’s flexibility and ability to work with their customers professionally and fairly.

Before signing a factoring agreement, ask questions such as:

  • How much of your ledger do you have to factor?
  • What if your funding needs shift in the middle of the contract?
  • What happens if your customer doesn’t pay an invoice to the staffing factoring company on time?
  • What happens if they accidentally forward payment to your business instead of the factor, despite signing a Notice of Assignment?

Gauge their answers to these questions and take note of how flexible they seem to unforeseen circumstances. An experienced factoring company like altLINE has seen it all and will do their best to work with customers to find a fair solution to any situation.

7. Demand Exceptional Customer Service

Factoring isn’t a loan or a traditional financing option. You’re not simply receiving funds from a financial institution and being asked to pay back the loan at a later date.

Invoice factoring for staffing companies involves a factoring company taking control of your accounts receivable and communicating with your customers. Because of this, finding a provider with top-notch customer service is even more important when utilizing factoring compared to other financing options. Your relationship with your customers is incredibly valuable; the staffing factoring company you choose needs to recognize that value and work hard to offer a seamless experience for all parties involved.

The Difference Choosing the Right Staffing Factoring Company Can Make

When Krissy Wellman, CEO of Wellman’s Staffing, broke off from her previous company to start her own firm, she immediately realized that making payroll was priority number one. She found a staffing factoring company to help improve cash flow so she could make payroll on time without stress, but a new problem arose. Wellman found that the factor she was working with wasn’t thorough enough with their background checks on her customers, and they began offering to do business with any of her customers, regardless of their credit scores or past payment habits.

Wellman began researching different factoring companies before she eventually landed on altLINE. For many, the immediate access to funds is the best aspect of factoring. But for Wellman, her favorite component of factoring with altLINE is how she can count on us to conduct thorough and professional procedures such as background checks.

Wellman Staffing Testimonial

Wellman even admitted that she wasn’t aware of how factoring worked before she started her business, but she urges all startup staffing agency owners to explore this alternative financing solution.

“I’d especially advise startup owners or small business owners who don’t know much about invoice factoring to look into it,” Wellman said. “I’ve been using factoring for three years, and it’s easy now for me to feel like I’m in a routine. But for new people who don’t really know or understand much about this process, let me tell you—it’s super informative, quick, and easy. The fees are not anything that is questionable or unreasonable—we have had no problems.”

Why Staffing Agency Owners Choose to Partner with altLINE

altLINE has 87 years of experience serving clients across numerous industries, including staffing and recruiting.

Robert Hundley, CEO of OneStop Recruiting, felt the effects of the time-consuming responsibilities that came with managing accounts receivable. That’s when he turned to staffing invoice factoring and altLINE.

“We knew we had to find somebody that would help us,” Hundley said. “We went from a $1 million company in 2016 to a $10 million company today, and that’s because of the partnership with altLINE and The Southern Bank.”

In addition to help with managing AR, staffing agency owners utilize factoring for a multitude of reasons. To make payroll, fund expansion, improve cash flow, and increase working capital, to name a few.

If you find that your firm could benefit from factoring, feel free to give altLINE a call at (205) 607-0811 or fill out our free factoring quote form.