Asset-based lending and staffing agencies make good business partners. It’s something that we’ve known at Crestmark for quite some time. The Commercial Finance Association’s “The Secured Lender” magazine recently featured Crestmark’s West Division President, Pat Haney, and East Division President, Steve Tomasello, in an in-depth look at how and why staffing agencies and asset-based lending companies are a good fit for each other.
In short, the article “Perfect Partners” explains how asset-based lending companies like Crestmark are able to understand, work with and scale to the long-term needs of clients like staffing agencies that are in a position to grow quickly. While their financial outlooks are promising, staffing agencies have needs that can’t be met by traditional lenders and standard bank loans.
“Staffing’s only going to grow. It’s the second-largest segment in our portfolio, and we only see that continuing in the future,” Tomasello explained in the article.
In select industries, companies are hiring workers, but only on a temporary basis at the moment. That means they need the flexibility of staffing agencies that can handle the recruiting and screening process until this growth becomes more permanent. Staffing agencies don’t always meet the requirements of traditional lenders, making asset-based lenders ideal partners for meeting the rapidly rising costs of financing payroll, insurance, taxes and other related expenses.
“Strong cash flow is imperative for the staffing industry,” said Haney. “Without it, they may get so far behind on tax payments that they go out of business.”
Both the staffing agency and the lender need to understand how the other company works, especially when it comes to the lag time between when the employee is paid by the agency and when the agency is paid by its client company.
As with all successful relationships, communication, patience and flexibility are key factors in making the partnership beneficial to both the lender and the borrower.