Q: We
own a 5-year-old temporary placement service, and I'm
constantly fighting the cash-flow battle of collecting my
receivables long after I've paid my payables. Do you have any
suggestions?
A: I
would suggest using a line of credit or factoring to keep up with
payroll and payables, using your receivables as collateral.
Accounts receivable lenders normally advance 75 to 90 percent of
the amount of money your clients owe you. You can also sell your
receivables via factoring, in which the lender buys receivables
from you on a discounted basis of 50 to 90 percent of the
receivables' face value. Both methods can be expensive but will
allow you to turn receivables into cash in days rather than
weeks.
Several national lenders, such as The Commercial Finance
Group, can do both accounts receivable lending and factoring.
Or try contacting The
Commercial Finance Association, which can assist you in finding
a lender. Good luck.
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Write to Doug Hood, founder and president of Rainmaker
Capital Corp., at doughood@rainmakercapital.com.
Originally published in the August 2001 issue of Entrepreneur Magazine