2. Net Funds Employed Structure
For many staffing companies, especially those that are interested in a more predictable financing rate, the net funds employed structure is an attractive option. The negative of this structure is the increased complexity which may lead to more confusion and uncertainty of what those costs actually are in terms of dollars and cents.
In the net funds employed model, costs are typically derived from two sources: the interest rate and the service fee (often called a transaction fee).
The interest rate is often stated as a percentage rate plus LIBOR or the current prime rate. The interest rate is then applied to the funds that are borrowed by the staffing company to finance their receivables and fund payroll. The service fee is a flat fee that is applied to every invoice that is funded and typically falls between 0.75% and 1.5% of the face value of the invoice.
These fees accrued by the staffing company are normally settled and paid to the payroll funding company at the end of each month.