Payroll funding, also known as invoice factoring, is a financing solution for the staffing industry to cover payroll by resolving cash flow problems. A staffing company could wait 30 to 90 days to receive payment on invoices. However, they need to meet employee payroll sooner. On top of meeting payroll, staffing agencies also need funds to pay employee taxes and other business expenses.
Staffing agencies can achieve consistent cash flow to sustain growth by selling their receivables to a payroll funding company. This will provide you with immediate access to funds, so you don’t need to worry about slow-paying clients.
What is payroll funding?
As a staffing company, making payroll is one of the most important jobs. Without payroll processing, you can lose employees and risk going out of business. Having access to your working capital is extremely important as a staffing agency business owner.
When you have a source of funding, you can pay your employees immediately, instead of waiting to collect on invoices. While there are other financing options like banks, many small businesses do not qualify as they do not have good enough credit or assets to borrow against collateral. This is why invoice financing is the payroll funding solution your staffing agency needs.
How does payroll funding work?
Payroll funding is the act of selling your invoices to a payroll finance company to receive immediate access to cash. This financing helps staffing agencies meet payroll needs without waiting to collect from customers.
The factoring company buys the unpaid invoice from your customer to advance the cash to your bank account the same day. Once your customer pays the funding company at the end of the payment term, you receive the rest of the invoice amount, minus a small fee. This quick access to capital helps sustain business growth.
Steps of payroll funding