Factoring

A generic term sometimes used to convey the use of various nontraditional work approaches, such as contingent employment arrangements, planned staffing strategies or flexible work arrangements. In general business terms, factoring has an alternative meaning and refers to a transaction in which invoices or accounts receivable are sold for immediate payment generally to improve cash flow. The receivables are pledged as collateral and the business may draw cash against the eligible accounts receivable at any time. Also known as business receivable financing, it is not a loan, so there is no need to make payments or create debt to the business. The rates charged to staffing firms for factoring range from 1% to 5%, depending on client mix. This is very common with smaller staffing firms, where managing cash flow is a critical concern.

Source: Staffing Industry Analysts

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