Being the middle man can have its disadvantages, especially if you’re a staffing agency. The payment structure that makes staffing agencies profitable – invoice for services – causes delays in payment processing that can make it difficult to pay employees on time. However, there are organizations that specialize in payroll funding for staffing companies that have trouble managing their temp agency payroll.
These banks and specialty lenders provide short-term payroll funding for staffing companies, giving owners more control over cash flow. Here are a few benefits of payroll funding for staffing companies.
1. Access to working capital is a major benefit for any business. Yet staffing companies often find their assets and cash flow tied up in the business and inaccessible when they need them most. Lenders that provide payroll funding for staffing companies will work with you to get you short-term cash while you wait for an invoice or funds transfer, so you’ll have a steady cash flow to put toward growing areas of your business and new endeavors.
2. Security is harder to come by for companies in today’s uncertain economic environment. But payroll funding for staffing companies offers a financial cushion. Having wiggle room in your budget better positions your staffing agency to handle a short-term imbalance between income and expenditures that could otherwise threaten your business.
3. Financial flexibility is a major asset for staffing agencies, which must navigate the tide of client demand. Financing temp agency payroll helps agencies survive the busy times and the lean times by allowing owners to ramp up or scale back their payroll funding. For staffing companies, some banks will also let you put up your accounts receivable as collateral, so you can request a funds transfer during the times of year when you most need it.
4. Happy employees make happy clients, which is good news for a staffing business. Payroll financing allows you to close the gap between getting a job contract and processing payment – sometimes 30 to 60-days – to pay staff in a timely manner. Instead of having to pay employees out of pocket until invoices come in, a lender can provide the short-term cash flow to cover payroll. Funding for staffing companies keeps you from having to dip into your own wallet, a win-win.
Having cash flow to support payroll is critical to successful operations, but there are also drawbacks of payroll funding for staffing companies. Depending on your agency’s financial strength and the current lending environment, it can be difficult to qualify for temp payroll financing. Some lenders don’t want to provide payroll funding for staffing companies, especially if they have risky credit histories or few assets. As a high-risk business, you could get stuck with higher interest rates and fees. If you’re interested in financing payroll funding, apply to multiple lenders and banks to sniff out the best deal.
Ready to engage with TemPay? We’re ready to talk to you. You can begin the application process for payroll funding by completing our easy form here. To get a deeper idea of how the payroll funding process works with new agencies, please view our Payroll Funding infographic. Lastly, if you have any questions, we’re all ears. Contact us and let’s have a conversation.