How Does Payroll Funding Work?
Payroll funding is offered by a factoring company. There are many factoring companies with custom funding programs for staffing agencies.
Once you select a factoring company, you will send you invoices to the factor for funding. The factoring company will advance a percentage of the invoice total, usually around 90 percent, within 24 hours.
Once the invoices are funded, they are sent on to your customer, who processes and pays the invoices in the agreed upon terms. After the factoring company receives the payment, the remaining balance, less a small factoring fee, is remitted to you.
Benefits of Payroll Funding
Steady Cash Flow to Help Manage Business Expenses & Payroll
With payroll funding, there is no more wondering about when you’ll get paid as you’ll receive immediate payment on your invoices. The steady cash flow helps you manage your expenses and meet payroll with ease.
Saves Time & Resources
Many factoring companies handle some back-office support services, allowing your staffing agency to have more time and resources to focus on growing. Some of the common value-added services include accounts receivable management, treasury services, credit services, and dedicated account managers to help with your entire invoicing process.
Since you’ll have steady cash flow, you’ll have the resources and confidence to take on new and bigger contracts. Because of the consistent cash from payroll funding, you can act quickly when opportunities arise.
No Additional Debt
Payroll funding is not a loan, so no additional debt is added to your balance sheet. Many agencies use payroll funding to build a stronger credit profile, which benefits them when negotiating equipment purchases, rent or leases, and other expenditures.
Payroll funding provides your agency with financial security. The steady cash flow gives you the confidence you need to pay your employees, keep up with bills, and grow. The fear of a negative cash-flow statement from slow-paying customers is alleviated as you’ll be paid on your invoices the same day.
About the Author, TCI Business Capital
Since 1994, TCI Business Capital has provided payroll funding and invoice factoring solutions to staffing agencies across North America. By turning your invoices into same-day cash, you’ll have the working capital to grow your agency and meet payroll with ease.