Payroll funding is the act of selling your accounts receivable for cash up front. Also known as invoice factoring, it is a form of financing specifically designed to help staffing companies make payroll before they collect from their customers. When you submit an invoice to a customer, the payroll funding provider purchases that unpaid invoice from you and gives you the cash that day. Once your customer pays the invoice, the provider sends you the rest of the money, minus their fee.
Payroll funding, also called invoice factoring, is a form of financing specifically designed for the staffing industry. Many staffing companies must wait 30-90 days to collect payment on invoices, but need to make payroll far sooner. By selling your receivables for money up front, you can achieve steady cash flow and sustainable growth. Check out our online resources or contact us to find out more about finding the right provider for you.
Numerous staffing agencies reap the benefits from payroll funding. If you find your agency in one of the following situations, you could be the right fit.
What should I look for in a payroll funding solution?
First and foremost, you should look for someone you can trust. A good financing company can act as a catalyst for growth. A bad one…well, it can put your company in jeopardy.
On the surface, cost may seem to be the most important concern when evaluating partners. While cost should absolutely be considered, it’s how your payroll funding company interacts with your staffing company’s customers that should be the primary focus.
How are collections handled? What will your account team look like? Do they understand staffing? What’s their reputation? Do they also handle payroll processing?
By working with an established funding partner or an FDIC member bank that offers payroll funding, you’ll have more comfort in your partner’s ability to complement your business goals.
For more information about what to look for in a partner, access our guide to choosing a provider.
What will my customers think about a third-party getting involved in collections?
Payroll funding and other alternative financing platforms have been around for decades (and even centuries in some cases). As such, customers, their accounts payable departments, and their project managers are more than likely very familiar with payroll funding relationships.
As customers have moved towards stretching their suppliers’ payments out, customers’ familiarity with alternative financing companies has increased as the need for cash flow solutions has risen as well. Assuming you’ve got the right partner in place, most customers will see the financing relationship as only strengthening the financial viability of their own supply chains.
What do I need to get started?
Every factoring company has its own unique process for approval, but to get started, most just want to get a better understanding for your business, your customers, and what sort of financing line you may need.
Payrollfunding.com is not only a resource center, but we also help match staffing companies with a financing partner that fits their business needs.
Want to find out more about potential solutions? Get started with a quote today.
How quickly can I get started?
Once you’ve been approved for funding (sometimes within one business day) and you’ve submitted your unpaid invoices to the provider, you receive 80-90% of the invoice value immediately in cash. The remaining 10-20% is transferred to you once your customer pays their invoice, minus the provider’s fee. It’s that simple!
Can I have bad credit and still use payroll funding?
Yes. Unlike traditional bank loans, payroll funding approval is based primarily on the creditworthiness of your customers, not your own credit history. Since the financing company is essentially advancing you money against invoices your customers owe, they’re more concerned with whether your customers pay their bills on time than with your personal or business credit score. This makes payroll funding an accessible option for staffing companies that might not qualify for conventional financing due to limited credit history, past financial setbacks, or being too new to have established credit.
How do I find a reputable payroll funding company?
Look for a provider with specific experience in the staffing industry, since payroll funding for temp agencies has unique nuances (weekly payroll cycles, workers’ comp, multi-state payroll taxes) that generalist factoring companies may not handle well. Check references from other staffing agency owners, review the transparency of their fee structure, and ask how they handle customer communication during the collections process. A reputable provider will be upfront about all fees, won’t lock you into terms that don’t fit your business, and will be responsive when you need funds quickly. Payrollfunding.com can help match you with vetted partners suited to your specific needs.
What are typical contract terms for payroll funding?
Contract terms vary by provider, but most agreements run anywhere from month-to-month to one year, with some longer-term contracts offering lower rates in exchange for a commitment. Key terms to review include the advance rate (typically 80-90% of invoice value), the fee structure (often a percentage of the invoice that increases the longer it remains unpaid), minimum volume requirements, and any early termination penalties. It’s worth asking potential providers whether they offer month-to-month flexibility, since this can matter a lot if your funding needs fluctuate seasonally.
What if I don’t need payroll funding every month?
Many providers offer flexible, non-contractual arrangements that let you factor invoices only when you need to, rather than committing to fund your entire receivables portfolio every month. This is a good fit for staffing companies with seasonal fluctuations or occasional cash flow gaps rather than an ongoing need. That said, terms vary widely by provider, so ask directly about minimum volume requirements or usage fees before signing, as some companies do require a minimum monthly draw or charge a fee for inactive months.
