[coco3299]

I have just opened my staffing agency in Georgia. I will need to factor my accounts receivable in order to gain operating capital. What is the worst case scenario that I could face? It seems pretty straightforward as far as I pay a fee for the service, and any late penalties (taken from my reserve). I have a few questions before moving forward.

1. What are the usual pay cycles for hospitals (30days, 45days?). How can I get this info from a hospital?

2. How much can I count on a hospital paying on time? It seems that this would be a more solid/credible approach to begin with, right?

3. How much interest can a startup business expect to pay? 5% ? 7% ?

4. How much is the reserve, and are there any other costs or situations regarding the reserve that I should know about?

5. What are good factoring companies or alternatives to factoring? Pledging?

[NRSKarenRN]

Pay cycles I've seen more like 45-90 days for home care/supplemental staffing getting actual $$$ from facilities and insurance companies.

[HarryHK]

The pay cycle is what you set, but 30 days is standard business. Also standard is charging 1% per month interest on unpaid balances (which is killer money if you don't depend on cash flow). Of course, someone actually has to work before you can invoice, so that would be close to 6 weeks before cash actually starts coming in.

Factoring costs can be 7% (from what I hear) down to 3% for rock bottom really good client deals.

You might want to consider starting small, learning how your business model works with low risk, and then scaling up if it seems feasible. Much better than jumping off the deep end. I've never even had to consider such things as a factor.

[eddy]

Put simply: Don't factor. It will bleed you dry, and you'll likely never catch up with your revolving debt. If you don't have the seed money needed to employ people or at least a solid line of credit from a bank, you really should not even attempt to employ your first person.