Heavy blows
The staffing industry has been in the news regularly since the outbreak of the corona crisis in March this year. In particular, payroll firms, secondment and staffing agencies specialising in sectors such as hospitality and events were hit hard as a significant proportion of their temporary workers ended up sitting on the couch at home. We also saw clever initiatives. For instance, some agencies made a lightning-quick switch to the logistics sector, where the corona frictions have actually created extra work.
Furthermore, the staffing sector was in the news for initially threatening to fall between the cracks in the NOW scheme. Fortunately, this turned out well. By 1 May, almost 1,500 temporary employment agencies had already applied for wage subsidies, indicating how hard the sector had been hit by the crisis. The job loss figures also indicate this. The number of jobs at employment agencies fell by 130,000 from the first to the second quarter, a drop of 17%. Such a large drop never occurred before.
Traditional banks reluctant
All this is a logical consequence of the nature of the sector. Temporary employment agencies are very sensitive to the economic cycle: they are the first to get hit, but usually also the first to get back up again. This sensitivity often deters traditional banks when it comes to financing. The fact that temporary work agencies often have strong seasonal patterns in addition to their cyclical sensitivity does not help. The hospitality industry is a clear example of this, but agencies focusing on logistics services are also affected.
Staffing companies are often not capital-intensive, but they are working capital-intensive. More than half of their balance sheet often consists of accounts receivable, the amount of which can fluctuate greatly throughout the year. And then there is the Chain Liability Act (WKA), which brings a number of tax/legal complications. In short: from a banking perspective, financing the staffing sector is certainly not a cakewalk. This is a pity, because - we expect - there will be plenty of growth opportunities again from next year. Opportunities that can only be exploited with additional financing.
The benefits of factoring
Fortunately, there is a solution in the form of an alternative form of financing. This is because the temporary employment industry lends itself perfectly to factoring due to its cyclical and seasonal sensitivity. The main advantages of factoring are:
- Higher funding: factoring companies provide funds that banks do not venture (up to 90% of the receivables portfolio).
- Within 24 hours of invoicing your buyer, you will have access to your money.
- More flexible financing than traditional bank financing.
- Through balance sheet reduction, factoring offers an opportunity to improve financial ratios on solvency and liquidity.
- Expertise from factor company regarding potential debtors (payment terms, delivery and payment conditions, etc.).
With factoring, therefore, the highest possible financing is achievable. This can be for the entire turnover or just one or a few invoices, depending on the form of factoring chosen. There are now many dozens of factoring companies in the Netherlands. But in doing so, it is far from always clear what they are or are not willing to finance and how the costs relate to the solution (and thus the revenues). We can help you gain insight into this.
Quick scan for employment agencies
Xolv Finance has the most extensive network of financing solutions and years of experience in factoring. Moreover, we are 100% independent, which allows us to make a quick analysis of the best options for staffing companies based on a financial quick scan. Are you working in the temporary employment industry and want to seize the opportunities - which are sure to come again? Then get in touch with us. Together, we will ensure a well-thought-out strategy and put you in touch with the right, reliable parties.
Also read: our previous blog about 5 ways to pass the bank and the article Two for twelve for staffing industry: take out credit insurance now.
