The Benefits of Payroll Funding for Staffing Firms

Contributed by Kendra Cato of Advance Partners

For staffing firms, managing cash flow can be a huge challenge. You must pay your employees weekly, but your clients take 30, 60, 90 days to pay. In the meantime, you are facing cash flow gaps that can hinder growth.

Enter payroll funding. This solution, tailored specifically for staffing firms and similar business models, solves exactly that cash flow problem, allowing you to meet payroll obligations without having to rely on traditional (read: slow and limiting!) financing.

Let’s dive into some of the main benefits of funding for staffing agencies and look at a real-world example of how this helped a North Carolina-based staffing firm.

Improved Cash Flow Management

As previously mentioned, the biggest benefit of payroll funding – and why it exists as an industry – is improved cash flow. The way it works is, rather than a traditional loan or line of credit, a payroll funding company purchases outstanding invoices and forwards you 80-90% of the value upfront. Then, when your client pays the invoice, they forward the rest to you minus a fee.

An example of this in action was with an Advance Partners client, NC Personnel’, a commercial staffing firm. While NC was self-funded for several years, after opening a second office and taking on more projects, they struggled with slow paying clients and having enough cash for payroll. Sabrina, the owner, was frustrated that despite growing and doing well, each week was a struggle. After exploring different options, she chose payroll funding.

Ability to Take on Larger Contracts

With payroll funding, staffing firms can scale without worrying about having the cash on hand to meet payroll. Whether it’s taking on a larger client, staffing a big project, or responding to new opportunities, payroll funding enables staffing firms to take on contracts that they may otherwise have to pass up.

After becoming a client, NC Personnel was able to take on new projects without worry. Sabrina, the owner of NC, said “We would have literally said no to new business without the financial flexibility from Advance. We would have been turning business away and payroll funding afforded us the opportunity to say yes.”

More Flexible than Traditional Financing

Traditional financing options, such as bank loans or lines of credit, often come with long approval processes and restrictive terms. Payroll funding, on the other hand, is typically faster and easier to obtain. Most funding providers offer a simple and quick approval process based on a few factors like accounts receivable and the health of your clients, meaning that staffing firms can access the funds they need with minimal paperwork or waiting.

NC Personnel first turned into a bank line of credit after running into their cash flow issue, but found it was a vicious cycle: growth required them to continue extending their LOC while the bank wanted it continuously paid down. This caused unnecessary stress in an already stressful situation.

Focus on Business Growth

By outsourcing payroll funding and other back-office tasks like invoicing, payroll, and collections, staffing firm owners and managers can free up valuable time and resources that allows them to prioritize running their business! With the financial burden lifted, staffing firms can focus on core business activities such as recruiting top talent, enhancing customer service, and growing their client base. This often leads to more significant revenue opportunities and ultimately a healthier business.

Sabrina from NC Personnel said it best when she mentioned, “When you own a staffing firm, you have way too many things on your plate, and payroll is the last thing you want to worry about.” With payroll funding, NC Personnel was able to meet payroll obligations, take on new projects, and eliminate the constant financial stress.

Conclusion

In a competitive staffing industry where cash flow can make or break a business, payroll funding offers a strategic solution. For staffing firms looking to scale efficiently and confidently, like NC Personnel, payroll funding is a smart, flexible choice that helps navigate financial challenges while unlocking new business opportunities.

 About the Author

Kendra Cato
Director of Strategic Partnerships, Advance Partners

Kendra Cato is a dynamic staffing industry thought leader and business influencer known for her ability to build meaningful connections between people and organizations. With nearly 20 years of experience in strategic planning, sales, marketing, and research, her experience in staffing technology has made her keenly aware of the importance of people and technology in driving business development. Kendra is currently the Director of Strategic Partnerships at Advance Partners where she works closely with the company’s leadership and sales team to build holistic relationships across the industry and help staffing firms grow. Kendra is also a thought leader, speaker, and co-author of “Together We Rise.” She is one of the founding members of Women of Color in Staffing, an organization committed to making the staffing industry more accessible, fulfilling, and lucrative for female leaders.