For many staffing companies, Accounts Receivable represent a large component of the balance sheet. In order to improve liquidity, many staffing companies utilize Accounts Receivable Financing to unlock the value in their A/R.
Accounts Receivable Financing companies provide staffing companies upfront cash availability against open invoices. As invoices are created and billed to customers, the staffing company presents these invoices to their financing company. Structured similarly to a line of credit, the financing company makes 80% to 90% of the face value of these receivables available to the company to borrow against.
In order to assist in the monitoring and repayment of financed receivables, the staffing company and Accounts Receivable Finance company establish a lockbox to which the staffing company’s customers remit payment. When payment is received, the funds are applied to the appropriate open invoice and any financed portion is paid down.