One of the biggest challenges staffing agency owners face is, meeting weekly payroll. Waiting 30, 60, or 90 days to receive customer payment makes it difficult for staffing agencies to maintain consistent cash flow and grow their business.
There are several traditional financing options for staffing owners to consider:
- 1. A business loan or business line of credit is seemingly the most cost-effective but can be time-consuming and frustrating, especially when denied. When a business needs cash, waiting for approval on a loan application may mean missed work opportunities or restrictive due to the loan amount granted.
- 2. A merchant cash advance is quick and easy but very costly.
- 3. Payroll funding allows small to mid-sized staffing agencies to accept new contracts while having a steady cash flow to stay on top of operating costs.
What is Payroll funding?
Payroll funding is also known as accounts receivable financing, and it provides instant cash flow so your agency can grow without limits. The process works by selling your open receivables to a payroll funding company in exchange for an immediate cash advance.
4 top reasons why a staffing company should use this type of financing:
- 1. It allows you to grow your business without incurring debt.
- 2. It gives you the confidence to know payroll is met every week.
- 3. It allows you to take on new clients or more significant contracts with short fill times.
- 4. Credit decisions are made based on the creditworthiness of each of your client companies, not your personal credit history.
How to get started with payroll funding for your staffing agency:
- 1. A temporary or contract employee works assignment at the client company.
- 2. The staffing company creates an invoice including timecards billing the client for work completed.
- 3. Funding company advances staffing agency typically up to 95% of the invoice value via wire or ACH the same day.
- 4. The client company processes the invoice in their regular course of business and pays the invoice to the funding company.
- 5. The funding company processes the payment and remits the invoice balance to the staffing agency minus the funding fee.
Frequently asked questions regarding Payroll Funding
Do I need to sign a contract?
Answer: Yes. Reviewing the terms before signing on with a payroll funding company is essential, as flexible terms are ideal for a customer. Most companies only offer a one-year (or more) agreement.
Do I lose control over my billing and posting?
Answer: No. You are in control of your invoicing. You may invoice your customer or have the option to have the payroll funding company send the invoice on your behalf.
Do I need to fund all my invoices, or can I pick and choose?
Answer: You may choose which invoices you want to finance and when. However, once you decide to fund one of your accounts, most payroll funding companies will generally require you to fund all the invoices for that customer to reduce payment confusion.
Can I qualify for funding if my personal or business credit is less than ideal?
Answer: Most funding companies are more interested in your customer’s creditworthiness than your time in business. If they have a good record of paying you, that will work to your advantage in the approval process.
About TCI Business Capital
Since 1994, TCI Business Capital has provided best-in-class payroll funding solutions to thousands of small to midsize staffing agencies across the United States. TCI Capital is a division of Fidelity Bank, allowing you long-term financing options. We believe in getting our customers paid for the hard work they do.
With TCI Business Capital, not only can you get the fast funding needed to cover payroll costs and other operating expenses, but you have access to staffing experts and back-office solutions to help your business grow.
TCI Business Capital has developed a strategic partnership with COATS Staffing Software. Our partnership makes it easy for staffing firms to combine payroll funding with cloud-hosted software.
Additionally, if you are a customer of COATS, you can include TCI as an additional recipient when you are using COATS software for invoicing your clients. This saves you time from having to submit your invoices twice, once to your customer and then to your funding company.