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    7 Replies Latest reply on Jun 17, 2008 2:52 PM by SQA_Mike

    Software Testing firm...

    SQA_Mike Newbie
      I started a small software testing firm last November and currently have a staff of 4 fulltime employees on a contract with a major insurance firm in Boston. I am also adding anoth employee to the project this next week.

      I started on my own money and have been able to get a fairly good payment terms of invoice every two weeks, net 30. The company has also been very good at paying invoices on time. I currently bill an average of $55,000.00 a month and have a gross payroll to employees of an average of $28,400.00 a month. This does not include Empoyer taxes. With the new employee that will jump to $32,960.00 bi-weekly or $65,000.00 a month.

      My problem, I am looking to get into a position of having a private investor back a months worth of payroll, so that I can add more staff to this and one other project I am working on, a total of 6 to 8 additional employees. The loan would always be secured as I always have two invoices outstanding, average amount of $32,000.00 each, with the new employee starting and these would provide these lender with security.

      Looking for one of two options;

      1. Revolving line of $50,000.00 which is paid down each month, or
      2. Fixed loan with monthly payments of $5,000.00 plus interest, also secured by outstanding invoices in the full amount.

      The credit line will be used only for payroll, which is directly billable to the client on bi-weekly basis. I will have submitted and gotten the invoice approved, prior to the payroll due date.

      My need does not require that I borrow more than the monthly outstanding invoices.

      If interested or can point me in the right direction, drop me a line.

      SQA_Mike
        • Re: Software Testing firm...
          LUCKIEST Guide
          Software Testing firm, Welcome to this web site.

          It looks like you have a interesting business going. What you need is a "factor"
          for your receivables.
          There have been posts from people who will advance you monies.
          Go to the top right corner of this page "Search this site" Enter "Solly" or factor
          and see what comes up.
          Solly and others says they will advance money.

          Good luck LUCKIEST
          • Re: Software Testing firm...
            mlebovits Newbie
            Factoring may be a good solution provided your customers are creditworthy and your invoices represent completed work. Milestone billings may prove to be a bit more challenging. If you happen to be billing in advance, factoring isn't an option.

            Here are two postings I have written on the guidelines for factoring (http://marshall-showmethemoney.blogspot.com/2006/06/guidelines-for-factoring.html) and benefits of factoring (http://marshall-showmethemoney.blogspot.com/2006/06/benefits-of-factoring.html).

            Let me know if I can assist in finding you a great factoring source.

            Marshall Lebovits
            www.Funding911.com
            • Re: Software Testing firm...
              paja_00 Newbie
              Hi SQA_Mike

              How are you? I happen to visit this forum and read your message. I am looking for the job as a software tester. Please provide me your email or contact info so that I can send you my resume.

               

              Thanks
              jay

              • Re: Software Testing firm...
                Lighthouse24 Ranger

                I can't really offer an objective view without all the relevant numbers. Personally (and +subjectively+), I'd be more comfortable with the flexibility that your first option would seem to provide -- especially if you see much potential for risk or opportunity beyond the current need to cover outstanding monthly invoices. (What if you lost the second project? What if you got a third one? What if you or your client had a major disaster/recovery event? What if a desirable resource were suddenly available and you had to move fast to acquire it/him/her?) My thought is that using a credit line might allow you to more readily and controllably adjust to whatever the future holds.

                Welcome to the community and best wishes.
                  • Re: Software Testing firm...
                    SQA_Mike Newbie
                    Hi Lighthouse,

                    Well to be quite honest with you, I like the first option as well, but let me answer the second half of your question.

                    Let's say I have two testers who are employed by me, they are clasified as hourly temporary employees, which means when the contract ends, their job ends. So if the contract ended on a Friday and they put in 40 hours, I would pay them and then bill the client for those 40 hours. So I am not usually at risk in getting paid for work complete.

                    Now let's talk about the billing cycle;

                    I bill the client at the end of two weeks and get paid net 30 from date of submission. If the client fails to pay, I stop working until I get paid. Most clients rely on the work we do, so it is a very rare occassion that we do not get paid. So even with an early end to a contract, I still get paid for the hours worked. And as the employees are temporary hourly employees, they come off my payroll.

                    So while there is a possibility of not gettting paid, it is highly unlikely, because other consultants would avoid this company like the plague. If I hear of a company being a slow payer or has not paid a contract company, I avoid them. This is a close net community and I know, after 27 years in the business, who pays and who does not. And in those 27 years as a consultant, I have always gotten paid.

                    And why would a temporary worked take a job like this? We pay them almost double what they get in a normal job. An average hourly pay rate for a funtional tester is 40.00 or about 80,000.00 a year.

                    I hope this provides some insight.

                    Regards,

                    SQA_Mike
                  • Re: Software Testing firm...
                    SQA_Mike Newbie
                    All,

                    I just wanted to take a minute to thank all who responded to my post. As it turns out I solved my own problem with a little creative money handling with our largest client and as of this month our firm will bill over $200,000.00 a month with a payroll of $110,000.00 and we are still growing with the addition of 7 more employees next month to meet new work orders from our clients. They also gave us projects that will carry us through 2010.

                    Our solution was in our largest customer, we simply went to them and honestly told them we were not going to be able to add the required staff to meet their demands for the work at hand due to the way invoices were being processed. They in turn put us on a prority pay list and we now get paid every other week, so the money problem to meet growth is now solved. With that solution, they continue to give us more work and we continue to deliver above and beyond their expactions.

                    If there is a recession, its not here in my line of work.

                    Regards,

                    SQA_Mike