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

  • Provide Services: The staffing company operates and provides services as usual based on the agreed-upon payment terms. Payroll can only be funded after hours have been worked to use payroll funding.
  • Billing Customers: The staffing agency invoices the customer like normal, but changes the “remit to” instructions. Once the staffing company has signed on with a financing company, the payment instructions change to pay the payroll funding company instead.
  • Sell the invoices: The staffing agency submits invoices to the payroll funding company. The staffing company receives the face value (usually around 90%) of the invoice the same day.
  • Collecting Payment: Once the payroll funding company has collected payment from the customer, the remaining invoice amount (minus a small fee) is released to the staffing agency.

Is payroll funding a fit for your business?

Using payroll funding could be a financial solution for your business if:

  • The business is a staffing agency
  • Your customers pay in 30 to 90 days
  • You need access to cash to grow your business
  • There is struggle to make payroll
  • You struggle to secure funding from traditional sources

If you’re a staffing agency experiencing revenue growth, delayed payments from customers, or are experiencing cash flow shortages due to unforeseen situations; payroll funding could be the solution for you.

For more information on how Porter capital can get you immediate access to your cash flow, give us a call today at (205) 397-1240 or get a free quote here.