When the recession began, companies of all sizes took a dramatic turn for the worse. Many had to resort to employee layoffs to stay afloat, causing the national unemployment rate to skyrocket to nearly 10 percent. With many companies cutting their work force, staffing companies suffered as well, but now staffing companies all over the country appear to be on an upswing, a positive indicator of the state of the economy.

In the second quarter of 2010 the Bureau of Labor Statistics released statistics reporting that between December 2009 and January 2010, temporary employment increased by about 250,000 jobs, a continued steady increase since September 2009. What does this mean? Companies are becoming more confident in the improving economy, they are once again expanding their workloads, and they are now searching for temporary solutions to improve workflow. Recent growth in a number of industry sectors shows that more companies are hiring temporary workers to fill openings. Increases in staffing requests at staffing companies have been seen in manufacturing, medical and food industries, as well as government sectors.

What does all of this have to do with invoice factoring?

Many staffing companies are now using invoice factoring as a means to keep up with the growth they are experiencing. Staffing companies hire people to work at other businesses and companies, and then invoice these companies for the work that the contracted workers have done. So the temporary workers are not actually paid by the company where they are doing all their work, they are paid by the staffing company where they were hired.

In general, staffing companies pay all of their employees each Friday, but it can be difficult to pay everyone on time if the staffing company is still waiting on invoices to be paid. With factoring, staffing companies can submit their unpaid invoices and receive up to 96% of the face amount in cash – instantly! The factoring company then takes on the risk of collecting the invoice.

Instead of waiting 30, 60, 90 days or longer for their invoices to be paid, staffing companies can now be compensated immediately, and ensure that they can always pay all of their employees on time. Factoring is not a loan. It’s just getting the money you are owed sooner rather than later. There is nothing to pay back, no high interest rates, no closing costs, no origination fees and no long-term commitments required.

Because most factoring companies offer funding based on the strength of the staffing company’s customers (i.e. the invoices they will be collecting on), even start up staffing companies or companies in challenged financial conditions, who otherwise might be ineligible for traditional bank financing, can use factoring to solve their cash flow problems. By taking advantage of the great benefits of invoice factoring, staffing companies can not only keep up with paying their employees, but even use their freed up credit lines and cash flow to improve or expand their businesses.

The increase in cash flow that factoring offers …