How does payroll factoring compare to a small business loan?

Payroll factoring and traditional business loans are two different types of funding.

In payroll factoring, staffing agencies sell their accounts receivable invoices for a fee to obtain immediate cash. Your clients then pay the factor.

On the other hand, traditional bank loans often provide funding only after a lengthy business and financial review and require good credit and some form of collateral, which will be seized in the event that your business fails and you cannot pay back the loan.

And while payroll factors will advance 90 percent or more of your invoices’ totals, traditional banks often lend only a portion of the money you requested, forcing you to find another source for additional funding or to decrease your budget. And, if you use all of your loan amount and need more money, the bank may not give it to you, whereas payroll factors, who understand the staffing industry, are much more likely to overadvance.

Interest rates and fees for traditional loans are also typically higher than those of payroll factoring. This can slow the growth of your business, because not only do you have to pay the loan amount back, you also have to pay interest. In addition, if you receive a loan, you are paying interest on the entire amount, even if you don’t use it all.

For information on TemPay and payroll factoring, visit or call (866) 683-6729.