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Y BUSINESS IS TERRIFIC, SO WHY IS MY CASHFLOW SO POOR?

“I am having the best year in business.” “Frankly, I can’t find enough bodies to fill the available positions.” “The only problem is that the cash flow is tight.” Sound familiar Staffing companies have benefited enormously from the vibrant economy. However, poor cash flow can stymie even the most successful business. Sales growth may be terrific, but a company must have sufficient working capital financing to accommodate increased volume Typically, staffing companies bill on 30day terms. Payrolls, however, must be paid weekly. The primary asset of staffing companies is accounts receivable. Using an assetbased lender, like Milberg Financial, a staffing company can typically borrow as much as 80% of its current accounts receivables. What does this mean? Let’s look at this scenario Quick Staffing does about $500,000 dollars in monthly billing. Total expenses run about $400,000 monthly. Quick Staffing needs to pay its bills during the month. However, it won’t expect to get paid by its customers for 3045 days. Additionally, Quick Staffing has been able to pick up some new customers, so while there will be new billing, there will also be more expenses. Quick Staffing has a $250,000 bank line, however they have been averse to using this facility. The line of credit is a demand line. It is available when the company needs it, but is capped at $250,000. The owner of Quick knows that in order to meet his payrolls, he needs to borrow. But what happens next month if business grows some more? The owner understands the issues, but doesn’t know the best way to fund his working capital requirements…… But business is good. He is making good money and has no trouble increasing sales volume.

How can he solve this financing problem
Solution Quick approaches Milberg Financial, Milberg is a privately held finance company. Milberg has been making assetbased loans for almost 70 years. As a matter of fact, they lend to some of the most prominent names in the staffing industry. Milberg sits down with the principals of Quick. The problem of poor cash flow is identified. Milberg agrees to set up a line of credit against Quick’s accounts receivable. The parameters established are an 80% line, up to $1,000,000.00 against eligible accounts receivable, generally speaking, receivables no more than 90 days old. The more sales, the more availability for Quick. So in our scenario, Quick can draw up to 80% against their A/ R. Today, eligible A/ R is 500,000. So accordingly, they can draw down as much as $400,000.00. Enough to cover the entire month’s expenses. Quick Staffing now has the wherewithal to increase their sales volume and know that as long as they generate sales, and continue to make money, they will have a line of credit that allows them to do more business. Equally important, they now have a financial partner that understands the staffing industry. Milberg Financial, a division of Milberg Factors, Inc., is an asset-based lender that has a significant presence in the staffing industry For more information, please call Dan Milberg or Bill Zisfein at (212) 6974200.

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