A Staffing Agency’s Ongoing Interactions with a Payroll Funding Company


Our Rates & Payroll Funding Programs Flexibility Beyond Other Companies Our Solid Track Record In The Industry More Than Payroll Funding: Other Services Payroll Funding And Staffing Articles Why There's No Pressure When You Contact Us Flexible Funding Site Map Contact Flexible Funding	A Staffing Agency’s Ongoing Interactions with a Payroll Funding Company Payroll funding or commercial lending to staffing agencies involves much more than just transferring money and collecting interest. As this lending is secured only on paper invoices and timecards, it is high risk lending. If anything goes wrong, staffing agencies do not have real estate, heavy equipment, inventory, etc. to lien and liquidate. Most agencies are poorly capitalized and funding companies must constantly monitor their customer’s accounts receivables and collections. The primary objective of funding companies is analyzing and monitoring accounts receivables to repay the loan so payroll funds and profit can be advanced on payday. There is no absolute foolproof way to provide temp agency financing. Every funding company does their best to minimize bad debt losses. Behind the scenes, payroll funding companies do a tremendous amount of work requiring extensive time, expertise and expense. If a staffing payroll-funding company quotes you a price that seems significantly below the cost of other payroll lenders, there is probably a catch. Nearly all accounts receivable factoring and lending companies have to do the same due diligence, information collection, setup, monitoring, servicing, and continuous problem solving. A small glimpse into the world of staffing agency funding and a few of the cost items covered by the fees are as follows: Staffing Agency Investigation, Setup, and Review Business Credit Application Company Accounts Receivable Aging Accounts Credit Check Ongoing Account Monitoring Accounts Receivables Credit Insurance Checks Business Organizational Structure Standing/Status DBA Documentation Business Credit Report Check/Investigation of Problem Items Personal Credit Report/Investigation of Problem Items Individual Background Search /Investigation of Problem Items Internet Search, Local, National Publications Media and News Articles Identity Theft Issues UCC Searches of Prior Records Balance Sheet/Income Statement/Analysis & Investigation of Problem Items Articles of Incorporation/Partnership Agreements IRS Tax Check / State Tax Liability Liens/ Current and Past 2nd Level Tax Details, Lien Releases Review/Redesign Invoices Time Cards Form and Legal Verbiage Review Staffing Agency Contract with Debtors/Staffing Vendor Agreement Contract Verbiage Additions/Changes to help secure payment VMS Vendor Agreements Subcontracting Agreements Assignments/Payment Terms/Partial Pays/Billing Procedures Regional and niche consideration (ex. In some markets, the combination of Industrial Temps, Small Markups, Intense Competition & Undercapitalization means agency can easily slip into distressed situations) UCC-1 Filings to Secretary of State to secure collateral position UCC Confirmation Post Confirmation UCC Searches to Reflect Proper position Multi-State UCC Filing Exceptions AR Finance/Factoring Contracts, Security Agreement, Service Agreements (Addendums, Negotiation of Modifications) Personal Guarantees, Certificate Copy of Resolutions Personal Financial Statements File IRS 8821 for Tracking Past, Current, and Future Tax Items Non Compete and Trade Secret Issues Inter-creditor Agreements with other lenders such as Small Business Administration (SBA Lenders), Banks, etc. Subordination Agreements with Staffing Agency Investors Determine Staffing Agency Owner’s Degrees of Separation between Business, Family, Personal Lives (ex. Do they have side businesses?) Knowledge of Accounting/Front Office/Staffing Industry Business Plans Judgment Investigation Internal Database and ACH/Funds Wiring Setup Electronic Interface with Clients Contact Management (Bank Contacts, Business Associates, Accountants, Lawyers, Silent Principals, Guarantors, Trade References) Software Balance Sheet/Income Statement Integration or Conversions Funding Loan Documentation/Loan Reports - Tracking of Account Receivables, Reserves, Eligible Loan Amounts, Loan Fees, Interest Calculations Pre-Funding Reconciliation & Crosschecks before funds release Special Circumstances Over Advances Determination of Ineligible Accounts Late Payments Over 45days, 60 days , 90 days ineligibility Cross-aging ineligibility (if required) Customer accounts over concentration limits of 20% ineligibility (if required) Affiliated or Inter-company Accounts Ineligibility Credit Insurance Effect on Eligibility of Accounts Management of ACH/Funds Wiring Network Returns/ Adjustment/ Correction and Acknowledgment of Entries Recalls, Stop Payments ACH Security/Firewalls/Disaster Recovery Cash Management for Excess and Deficiencies/Bank Account Sweeps Record Retention Ongoing Monitoring & Remedial Action Invoice Form/Detail Changes Illegal Check Diversion Continuous Monitoring for Liens (At Difficult County Levels, as well as Fed and State Levels, Out of State Monitoring) Tax Liability Liens for Prior Years - IRS Negotiation/Resolution UCC Continuations Changes in Corporate Status - Suspended, Expired, Dissolved, etc. Re-filings of 8821’s for tax tracking Debtor Investigation & Setup, for Added or New Shareholders & Partners Bankruptcy/Receiver/Trustee Communications & Strategy Fraudulent UCC-3 Terminations Client Agreements with Junior Debtors Client Becomes new Judgment Debtor Article 9 UCC Code Changes Account Debtor Notification Letters to Accounts (if required) Miscellaneous Threats to Security Interests Red Flag Items that may threaten the health of a company and the money loaned to it (Business Partner Disagreement, Divorce Marital Problems, Family Succession Problems, Health Problems, New Local Competitors, Employee Fraud, Lawsuit Resources Drain, IRS Issues, Outside Investment of Owner Collapses, Better Business Opportunity Outside of Staffing, Unfavorable Legislation, etc.) Lockbox – Personnel / Procedures /Problems Management Collection reports to borrowers Customer/Debtor Names and Invoice Mismatch No Invoice Numbers or No Invoice Match Skipped Invoice Partial Pays Customer Name Changes—Sales, Mergers, New DBA Multiple invoice payments/check Permanent Placement Invoices Tracking and Refunds Endorsement problems Stub/Check Copy Management and Daily Detail Lookups Manage Stop Payments/Bounced Check /NSF/Redeposit, Lost, Stolen, Forged, Counterfeit, Checks and customer/debtor follow up Incoming EDI electronic payments processing Time Card and Invoice Copy Storage & Retrieval Credit Information, Problem Accounts/Collections, Bad Debt Protection Customer Credit Applications Procedures for Credit Check Requests Proper Debtor Entity Determination - Affiliates, Subsidiaries, Sale-Merger, (Who owes and why won’t they pay?) Interpretation of Credit Reports Credit Limits Negotiation of Terms with Higher Risk Customers - Advisory Demand Letters Workout Agreements With Account Debtors Broken Payment Promises Follow Up Collection Strategy Advisory & Time lines for Actions Collection Communications to inform multiple parties (Lender/3rd Party Collection Assistance Groups/Staffing Agency/Debtors) of progress and problems, to coordinate strategy and avoid redundant collection efforts and communications. Large Account Debtor Approval Unwarranted Deductions, Credit Memos and Disputes Invoice Verifications (when required) Management of Distressed Staffing Companies and Accounts Counsel on Business Practices/Staffing Agency Breakeven Analysis Legal/Timely Customer Notifications to All or Selected Accounts & Follow Up Skip Tracing-People Finding Close of Business /Voluntary or Forced Sale Negotiating for Voluntary /Legal Workouts Continuing Business with Workout/Payment Plan in Place Continue Business until Sale Can be Effected--Help facilitate Sale/Merger Continue Financing Staffing Agency until New Lender can be brought in Ongoing Management of Collection Agencies & Case Detail Management of Collection Attorneys & Case Detail Management of Private Investigators Special Searches & Case Detail, (ex. Bank account locators, Credit card activity, Phone bills and phone traces, Litigation Search, Asset Searches, etc.) Managing Problem-Loan Workout Defaults Adverse Lender Direct Communications (ex. Primary or secondary lenders) Management of Credit Insurance Claims Bankruptcy Issues/Strategy/Legal Management of Secured Lending Attorneys (ex. Adverse Lender problems) Promissory Notes Credit Card Captures Lender & Equity Investor Buyouts Buyout Agreements/Negotiation of Fine Points With Old or New Payroll Funding Company, Factor, Bank, Lender, etc. UCC Assignments & Termination Filing and Follow Up Determination of Correct Loan-A/R Buyout Amounts Check Interception by Prior Lender/Factoring Co. or Subsequent Lender Funding Contract Early Termination Fee Issues Subsequent Complications & New Entities (ex. Business Alter Egos) Staffing Agency Sale/Merger Buyouts Illegal UCC’s filed by Funding Companies When Customer Price Shops Market Asset Based Lending or Factoring Software and Systems Client/Customer Service On-Line Website (Programming, Updating, & Customer Training and Support) Imaging, Digital Copies, Import Integration with External Business Entities Extensive Search Capabilities Managing Out-of-Formula Situations Daily and Monthly Activity Reports Exception Tracking Customer Requests for Custom Transaction Reports Bank Audit Compliance Lending to staffing agencies on invoices as the only means of repayment is risky and credit is a constantly moving target. Over the course of a funding relationship between a funding company and a staffing company, any of these items can affect your daily interactions.

Call Us: 415-391-4320 or 1-800-487-8327 Flexible Funding, One Embarcadero, San Francisco, CA 94111 Steve Capper can be reached at: steve@flexiblefunding.com