From the August 2001 issue of Entrepreneur

Q: We own a 5-year-old temporary placement service, and I'm constantly fighting the cash-flow battle of collecting my receivables long after I've paid my payables. Do you have any suggestions?

A: I would suggest using a line of credit or factoring to keep up with payroll and payables, using your receivables as collateral. Accounts receivable lenders normally advance 75 to 90 percent of the amount of money your clients owe you. You can also sell your receivables via factoring, in which the lender buys receivables from you on a discounted basis of 50 to 90 percent of the receivables' face value. Both methods can be expensive but will allow you to turn receivables into cash in days rather than weeks.

Several national lenders, such as The Commercial Finance Group, can do both accounts receivable lending and factoring. Or try contacting The Commercial Finance Association, which can assist you in finding a lender. Good luck.


Write to Doug Hood, founder and president of Rainmaker Capital Corp., at doughood@rainmakercapital.com.