What is staffing factoring or payroll factoring?
Staffing factoring (also known as payroll factoring or payroll funding) is a process that allows staffing companies to finance outstanding receivables to secure immediate working capital. Many staffing agencies and recruiting companies have used this funding method to cover payroll expenses. Unlike bank loans and lines of credit, staffing factoring does not require any interest payments. This alternative method of funding is not a loan, rather is a sale of receivables. Staffing companies constantly face the challenge of sustaining payroll due to slow-paying invoices.
They have a service providing temporary and/or contract staff to clients, and that workforce has to be paid regularly. A staffing company has to meet weekly and monthly payroll in order to run their business. However, most contracts usually have net-30 to net-60 terms, which often leads to slow-paying receivables.
This can cause insufficient cash reserves and cash flow problems. Many staffing companies cannot afford to wait for invoice payments when they have various payroll deadlines to meet. Payroll factoring is a common financing solution for staffing companies.
Payroll factoring advantages
Payroll factoring has many advantages, including:
- Consistent and predictable cash flow
Payroll factoring guarantees that you will receive ongoing working capital.
- Enables business growth
With payroll factoring, staffing companies can run and grow their business without any cash flow worries. Funds can be used to recruit more staff and accept new client orders.
- Easy qualification requirements
Qualifying for payroll factoring is based on the creditworthiness of your clients.
Payroll factoring offers flexible and scalable funding that can grow with your company. The amount of funds provided increases as your company grows and takes on new orders.
- No debt incurred
Factoring does not create debt on your balance sheet because it is not a loan.
How does it work?
Payroll factoring works like traditional factoring. In a payroll factoring arrangement, a payroll funding company will finance a staffing company’s receivables at a discounted rate. The payroll funding company typically makes this purchase in 2 installments consisting of the advance and the rebate. The advance is paid immediately and the rebate of the remaining balance (minus factoring fee) is provided after the client makes a full payment for the invoice. Payroll funding companies will determine your factoring rate based on risk parameters such as the volume and size of your invoices, and the credit quality of your clients.
At Growth Capital, we keep things simple, so you can get paid as quickly as possible. We provide an easy-to-implement payroll factoring program for staffing companies. Here are the 5 steps involved in payroll factoring after you open an account with Growth Capital:
Provide services to your client as usual;
Invoice your client and submit a copy to Growth Capital along with signed time sheet;
We send you an instant cash advance;
Your client pays Growth Capital the full amount of the invoice when it is due;
We send you a rebate of the reserve amount, the remaining balance less our small factoring fee.
Ready to get connected with the best staffing factoring company for your agency?
Do your clients take up to 90 days to pay off their invoices? Can’t make payroll? With Growth Capital, factoring is an easy way to fund payroll. Our staffing factoring program is designed to solve your cash flow problems. We offer high advances and low discount rates to staffing companies of any size. Our knowledgeable team of experts will support your company through the whole process to make sure that you get paid. We use advanced software to handle your factoring transactions efficiently. Don’t let slow-paying invoices limit your success. Get the funds you need now to fulfill your financial obligations and to welcome new clients. Growth Capital will handle the invoices for you, giving you more time to focus on growing your company. Contact us today