Most often you would be talking to Steve Capper or Mark Miller. Steve Capper is the founding principal/CEO and can cut to the chase so much quicker than a commission salesperson and/or middle management that are the initial contacts at other companies. We do the funding ourselves; we are not a broker. If the fit is right you get a answer quicker. If your particular circumstances do not fit our programs, most often you will have saved yourself time because Steve has many contacts in the funding industry and, as a courtesy, may direct you to the lender who can handle your unique situation. Flexible already has a strong customer base, does not have commission salespeople, and does not obtain nonrefundable deposits or due diligence fees, therefore, there is never any sales pressure.
Mark Miller is the head of underwriting and is extremely involved in our marketing and contracts management. With the company over a decade, he can well communicate our benefits and is able to convey the fair business manner that sets us apart from other funding companies. In many banks and funding organizations, unseen underwriting or credit people are really the ones calling the final shots, and you are never able to communicate with them. If Mark is ever the first point of contact for you, it would be followed up with a call from the CEO, Steve Capper (or on rare occasion by his business partner CFO Steven Elias.)
Our primary product is invisible-to-your customer Asset Based Lending (ABL) credit lines secured on invoices-accounts receivables only. This is generally secured on a pool of receivables. We also offer factoring– a purchase of individual selected accounts– for people that better understand and prefer that model of financing. The ABL product is highly preferred to many staffing agencies for many reasons….. There is nothing on the invoices that indicates that you are funding. Your customers continue to make checks/payment- in the name of your company.
In the normal course of business, we do not notify your customers that we are in the picture. We do not call your customers every week to verify every single invoice and we do not collect from your customer. Outside of the normal course of business, when unusual situations develop, we retain the right to notify and verify.
This is an unlimited credit line, regulated by the amount of receivables. The cost of an ABL credit line tends to be less expensive than payroll factoring programs. You may borrow the exact amount you need, at your discretion and your accounts receivables remain on your balance sheet as an asset of your business.
Factoring is technically a purchase and sale of your invoices. You may fund an account that you select, provided it is approved for credit. Once you have selected an account for funding, the invoices from that account must continue to run through the factoring company (until the factoring company agrees otherwise). Factoring does generally include notification to the customer/account debtor that the invoices are funded, and verifications of invoices. Notification and verification allows factoring companies to handle more risky situations, such as heavy customer concentration. Flexible Funding does a lighter and less intrusive form of factoring for staffing agencies; call for details. If and when we ever fund any businesses outside of staffing, we tend to prefer the factoring model.
Cost depends on a multitude of factors: What is the sales volume? We offer volume discounts for higher volume. How quickly do the receivables pay? Flexible offers less costly programs for quicker pay. Is there customer concentration? Less concentration means less risk, and possibly lower cost. How long has the company been in business? A company with a track record and great corporate infrastructure may qualify for better pricing. How much money does a company need? If the amount you are funding at any time is less (than two thirds of the amount of your total receivables), the pricing will be much less.
The bottom line with Flexible Funding is that we MUST remain extremely competitive in the payroll funding arena. Competitive pricing is virtually guaranteed because we do not have a long term contract. If somebody finds better pricing, they are free to move on to another funding source, without any penalties.
The answer is, how quickly can you provide us with the information we request? At the rate that most people provide us with the information needed for our due diligence, typically it takes seven days to two and a half weeks. If the information requested is provided to us quicker, we can move faster. We have approved and funded in three days. Non disclosure of material facts, such as hiding the fact that the business or the principals have a monthly payment IRS workout plan for not paying back taxes will slow the process down, or may halt the process.
If a bank is in the picture with a prior first-position claim to the accounts receivables, it will slow things down to the speed at which the bank will cooperate with everyone. If things are relatively straight forward, we can make decisions quickly, and if necessary, will work into the evenings and on weekends to help.
A mediocre credit report would be OK, but a very bad credit report is a problem for us. IRS problems are generally a deal killer for us. State tax problems may be ok depending on the amounts. Bankruptcies on a credit report are examined case by case; what are the amounts, how long ago was it, and what are the reasons for it?
Absolutely. We have funded every niche of staffing as a startup operation. People call us when the whole startup is just an idea in their head. They call us when all the pieces are put together and they will be starting payroll “next week.” They sometimes call us when they have already signed with another payroll funding company, have not actually funded anything yet, and are having serious buyers remorse about what they got themselves into. We have probably seen every possible scenario over the past few decades.
Our own company, Flexible Funding, was built by the current principals from scratch, brick by brick, so we can surely understand the hopes and early efforts toward an independent successful future. There are always a lot of questions for any startup. We would like to know that there is a well thought out plan. We are interested in your markups and margins, staffing industry experience, what contract you may be using with your customers, and whether there could be a problem with a former employer as to stealing customers, temporary workers or any information that could be considered trade secrets. Flexible can provide resources and/or answers for some of these issues.
The vast majority of the entire payroll funding industry effectively funds 90%, including us. Companies that tell you they fund 95% or 100% have ways of taking an additional reserve (that is not called a reserve): see the white paper Payroll Funding Risk for greater detail on how and why this is achieved. Flexible Funding will truly fund greater than 90%, even up to a true 100%, for certain purposes such as a buyout of a bank’s first-place security position in the accounts receivables. (Then months down the road we gradually work it back to 90%.)
In some other cases, we fund more than 90% for periods of time, depending on the health of the company. Staffing company payroll funding companies will often tell you that they have a wonderful advance rate of 90% or 90+. What tends to be ignored is that most of the programs require that you must borrow 90%, or more, at all times over the life of a long term contract. In these programs, you cannot borrow less. On Flexible Funding’s programs, if you don’t need the money for some period of time because you are profitable, or just want to save money by borrowing less, you can fund less at any time.
We start with an accounts receivable aging detail, aged from the invoice date (not the due date). It is preferred in Excel format. We’ll ask for a complete client list, and run business credit checks on your concentration customers (direct contact is not made with your clients). VMS’s (Vendor Managers) and MSP’s (Managed Service Providers) should be included. If you are a startup operation and don’t have an aging, the names and addresses of a few of the prospect accounts are needed to run some credit reports. We do this confidentially and at no charge to you. If the accounts are not real credit worthy, we may make recommendations of how to structure your contract with your prospect so that you can safely do business. Or we may find that they are not a safe account for you or us.
Many other funding companies will get an application in the door first thing as quick as possible. In a lot of cases, this is done so the salesperson will look like they are doing their job–getting in applications for consideration. One problem with a quick application is that it allows the funding company to run a personal credit report on you. If they then find something wrong with your accounts, or prospect accounts, your credit score will be knocked down for an inquiry into your personal credit. If your accounts look reasonable, we’ll have you fill out a 1-page “Short Form” application. After receiving the Short Form, we’ll conduct some standard due diligence (i.e., run credit checks on the company Principals, web research, corporate registration, UCC search, etc.)
If a Principal or the Agency itself has any bankruptcies or tax liens, it’s helpful to share that up-front. If any questions arise regarding the stability or financial condition of the agency, we may request standard internally prepared accounting reports (Income Statement, Bal. Sheet, etc.) Down the road we may also need to see some of the contracts with your customers. We usually do not need to see business tax returns, personal tax returns, accounts payable aging summary, CPA reviewed statements or audited statements.
Yes, we can provide all of these services, or any of them al la carte. If necessary, you can leave our funding program and continue on having these services provided. Or vice versa–keep the funding services and move on to another back office provider or move the services in house. Web based front office software and back office software are available.
It can depend on how many invoices are prepared each month, how many checks are cut and what the sales volume may be. Typically full service back office in the marketplace runs about .75% (three quarters of one percent) to one percent of the billing amount. (This is not the funding cost but only the back office portion.)
A funding company, such as Flexible may need to log onto the VMS system to verify that billings are in the system correctly and to confirm that there are approvals for the time worked. Separate from the VMS system, an accounts receivable aging detail showing the VMS billings is useful. If you don’t have an aging and only rely on the VMS system to bill, we can walk you through setting up an aging on Quickbooks (online) or another good system.
Yes. If you have to pay people every week, or bi weekly, but are only able to bill the customer once a month, we do have ways to fund such flows. Call us for details.
Yes we can, but never ever at the early stages of our conversations. Term sheets and letters of intent are a bad way to compare different funding companies. These one or two-page proposals can be quite deceiving, not because they include false information, but because many other payroll funding companies always LEAVE OUT key information. A proposal can be structured with a rate that looks a lot lower than another company, however, it may not include all-in fine print costs.
Many people do not really know how to take a number of proposals and truly make them apples-to-apples; it’s difficult when you don’t have everybody’s fine print. You have to be well aware that one funding or factoring company may be giving you a proposal of terms that are a firm commitment, and another company may only be giving you a proposal of terms that are subject to unseen credit and underwriting people approving the terms later on–after they have spent weeks looking at your company data. What happens is that one may be teased by a limited-information low rate proposal into choosing a funding organization. The business consumer then waits in complacency for weeks until the contract is delivered–when the fine print has been altered to effectively increase the rate or reduce availability/account eligibility. And by then, one may urgently need the funding to point that they cannot wait any longer and must accept the terms.
There are dozens of variables that determine the real cost that you pay. One company may be quoting a rate that is charged on the invoice amount and another company may be quoting their rate charged on the amount borrowed. One payroll funder may return monies to you once a week, where another may make your monies available to you every day. There can be large costs that are triggered by certain events. For instance, if during the term of the funding contract you do not meet one of the defined minimum standards of operational criteria–known as covenants–then the cost may be substantially more (than anything referred to in the proposal), whereas another company like Flexible Funding may not charge more for the same situation.
Enormously expensive contingent legal costs of some companies are not referred to in proposals see our article on legal expenses. We have seen a number of payroll funding companies that have a prime rate cost component in their proposals. An example of a prime rate cost component would be 3 1/2% (three and a half percent). However, in their final contract fine print they state that the prime rate component is subject to a minimum floor…”at all times the prime rate shall be no less than 5%.” A company may offer a proposal with “up to 90” funding, which according some definitions, is not the exact same thing as (a firm) 90% funding. There can be major non-price trade off advantages/disadvantages no matter how the pricing looks between two companies. For instance, two companies could appear to be the same price, but one company’s processes may be a very intrusive on you and your customers, whereas the other company may be easier to work with.
From the above, you can see why we don’t like to send out term sheets/proposals quickly. If we know that the competitors in the deal have a tendency to mislead in their proposals, or if we understand that the shopper has a limited knowledge of finance, we prefer to educate first.
On our asset based lending ABL program, any time you ask for them. They are available daily, upon request. If the total loan balance is ever paid off by incoming payments, then any excess is refunded daily, automatically, electronically by ACH transfer directly into your bank account.
Although that may be a problem with other payroll funding companies, that would never be a problem with Flexible Funding because we do not have long term contracts. We do get calls from people who are in long term funding contracts and would like to be let out, but their funding company is unwilling to cut them loose. When we get such calls our inclination is to help, but we are NOT inclined to try and take the account away from the current problem funder during the term of the existing contract. If we hear what the dissatisfaction is about, we would be able to tell you if the payroll funding company is truly being unreasonable under the circumstances. It may be that no other funding company in America would do any different, or could do any better given the problems.
We ask if you have rattled the cage– complained to the funding company about the issues. It is often determined that the cage has been rattled with the wrong person at the funding company and (as we have a lot of friends in the industry) we may be able to suggest a more influential person for you to contact to get your problems resolved. In a few cases, with full permission, the CEO of Flexible has even called other friendly funding companies to get the message through that the customer is unhappy…with a positive resolution. The funding company may not be able to handle your problems because of their funding structure, and cannot handle exceptions to the rules. If they are willing to let you go we can work out a quick and easy transition.
On the other hand, we know the basic contracts in our industry quite well and if the funding company is playing hardball with ironclad provisions that will keep you tied, we would honestly be able to tell you that the only thing for you to do is patiently wait it out until the end of the contract term. In one case we financed or loaned the amount of the penalty exit fees.
A line of credit secured only on accounts receivables is our main product. We also do factoring or purchases of individual accounts for those that prefer that form of financing. Such a question is a very broad and open-ended proposition, so one should allow no less than 15 to 20 minutes–for a conversation that would be kept very simple. If you have the time and desire the education, we tend to be generous with our time and would discuss the funding industry for 60 or 90 minutes. Or even longer if you want. If you prefer to read and would like good prior industry knowledge before talking to funding companies, the article on our website written by Howard Kane is the most concise article we have ever seen about the funding industry and funding programs.
The Principal of Flexible Funding is well aware of the time constraints of entrepreneurs and can arrange to talk after hours, on weekends, or even holidays.
Yes, we do when they are referred to us, but we stick to financing accounts receivables. We are not real estate, equipment or inventory lenders, however, we do have friends in those industries and may be able to connect/refer you.
We can pull a credit report at any time for free, but we must know the proper entity to pull the report on. If there is a parent company, subsidiary relationship, a middleman VMS Vendor Manager or Managed Service Provider in the picture, we must be informed. Flexible Funding pulls both Dun and Bradstreet and Experian credit reports. D&B will give two credit recommendations, a lower “conservative” dollar amount and also a higher “aggressive” one. If a credit report says that an account is good for $60,000 of credit, we do not necessarily limit to exactly 60K. We usually look at it as a general guideline; if a company is good for 60K then they are probably good for 63K. If the D&B report gives a limit which seems too low, then we can pull an Experian report to see if it looks any better.
If the staffing agency’s customer, or potential customer is able to provide financials, then payroll funding companies like Flexible Funding can sometimes do more. If you have been working with the customer for quite some time and have a solid history report of invoice dates and related payment dates, and maybe even some cleared checks, we may be able to do more. If the customer account debtor signs your contract when there is an added UCC Uniform Commercial Code security clause –which allows you to be a secured creditor–then we may be able to do more. Call us for details on UCC clauses. In some cases, payroll funding companies are able to stretch when there is credit insurance on an account, however, be aware of 20-30 page policies that make it difficult to qualify for payment on a loss.
Yes. We would like to know who they are and that they are a financially solid PEO. We may already have experience reports from our existing customers. Or we may contact one of the PEO brokers that we know for a credibility report on any PEO.
Funding for just one time, or only for a few weeks, is done by businesses called spot factors. We are not spot factors.
We can work with all of these scenarios, or can provide it at almost any level.
Yes. Although we interact with many different staffing-specific softwares daily, the majority of our customers and potential customers do use Quickbooks. The primary report for original evaluation, and weekly payroll funding, is an Accounts Receivable Aging Detail aged from the invoice date (not aged from the due date). On an asset based lending program, the accounts receivables remain on your Quickbooks balance sheet as an asset of your company. On the liability side of your balance sheet financial statement, there would be a loan balance, just as if you had a bank credit line.
This form of asset/liability listing is important if you are ever to be evaluated down the road by a bank for an actual bank line, although be aware that banks effectively fund only around 64% of your accounts receivables and will further establish a lower cap on the credit line amount. When you choose to do factoring which is a purchase/sale of your receivables, or are limited to factoring because of certain risk factors in your organization or your account debtors, then the accounts receivables will not remain on your balance sheet as an asset.
Whether you do ABL or factoring, you can invoice your customers through Quickbooks. Flexible Funding get copies of the invoices easily because you can turn them into a PDF with one click. Flexible has also developed programs that allow payment collections from your customers to be posted automatically, so that you do not have to do it manually all year long.
We do not have a cash reserve. We do not sit on a designated amount of cash during the term of a long-term contract as some other companies may do. They may designate it as a fixed amount such as $10,000 or may designate it as a percentage of of some variable amount… (ie. 1% at all times of some variable figure). ALL non-employer-of-record payroll funding companies have reserves or effective reserves, even if they told you they fund 100% They may not call it “a reserve” but it is there; we can point it out to you in most any program. And even if it were not readily apparent, contingency clauses in funding contracts usually allow funding companies to take a reserve, or greater reserves, at their own discretion.
Any small reserve that is maintained in our program is simply a portion of your accounts receivables that we have not funded. They are not cash in our bank accounts. They are reflected in your accounts receivables…portions of amounts owing from your customers.
The best purpose to provide financing is for the increased growth of your business with solid customer account debtors. Seasonal volume is a common reason for financing. Sometimes payroll financing is for a slowdown in the payment cycle of the receivables which may be related to the sale or merger of a company, or a change of customer terms demanded by a large account. The installation of a new VMS/MSP at your customer account may be the reason as the money must go to the VMS first before it comes to you. Payroll funding may be done for the purchase of a staffing agency, the buyout of a business partner, or to get cash out of a strong business for some other investment. All of these we can understand. The one reason we do not like to fund a business is because the business is losing money badly. We see this in the light industrial staffing niche more than anywhere else where there is no markup/margin to be had in some markets. The management may think that a shot in the arm for a few months will help, but it rarely stops the bleeding. Be sure to look at our profit/breakeven calculator to help determine if this is the case.
Yes. All of the funding companies in the niche of funding staffing agencies do, as far as we know. We are only aware of one factoring company in the U.S., that does not specialize in staffing, that does not require a personal guarantee. In an arrangement without a guarantee, to be absolutely certain the factoring company gets paid back under all possible circumstances, the factoring company has to have a significant amount of control over the staffing agency’s customer account debtors. The level of intrusiveness can hurt customer relationships. Or in some cases it can result in a surprisingly fast cutoff of funding availability when the customers do not cooperate timely. Our guarantee is as short as it gets in our industry…. only one third of a page.
Some other companies have two or three page guarantees, or tiny print that is three pages long when blown up to a readable size. Banks and bank owned payroll funding companies tend to have the most severe guarantees, and would be more likely to enforce them if something goes wrong. See the white paper on the Risk of Banks. The primary purpose of our guarantee is to deter fraud on the part of the staffing agency owners and management. Flexible Funding has never lost money for credit or bad debt reasons, and is quite supportive in credit and collections when needed or requested.
Credit investigation, credit monitoring, and collections when requested. Some help with Quickbooks and Quickbooks integration with other softwares. Sources and connections for insurance, software, payroll, staffing law, VMS systems, advertising and web development, mergers and acquisitions, tax workouts, startup consulting in general staffing and medical staffing. Help with entire business profitability number crunching, or number crunching to assure profitability at any individual account or prospect that you may have. We have also done skip tracing and tactical writing/letter editing for our customers. If we don’t have the answer to one of your staffing problems, we are willing to research it at no cost.
Primarily internal capital, and some fill in with massive bank credit lines. Everything is closely held– Flexible Funding does not take in capital from strangers or outside investors. We do not issue securities. Flexible Funding is a regulated, licensed, and bonded commercial lender. The State of California investigated the original sources of capital and the principals when we entered the business, and it audits our company annually. Our bank audits us every 8-12 months, and requires significant equity at all times. We have been funding staffing agencies since 1992, and other businesses longer. Flexible Funding is an honor roll member of the Better Business Bureau. Both Principals of the company have been personally established in the same regional area for decades. (The CEO and his entire immediate family have been in the same cities/county for over 60 years.)
Some Examples: Company name. Type and location of entity. Fictitious business names or DBA’s doing business as. Principals. Business background of principals. Website. What temps or contractors will be doing on the job. W-2 or other status. Source of workers compensation insurance. Softwares running the business. General mark-ups or gross margin. Projected sales increases. Prior or current financing of the business. Reason for funding. Target date for funding. Non compete, trade secret or temp stealing issues in the case of startups. Bankruptcy or tax issues of the business and it’s principals. Contract arrangements with large accounts. Locations of all offices. Accounts receivables aging detail; customer accounts, amounts outstanding, and length of time outstanding.