Exit Through Buyouts and Payoffs

A frequent exit out of a payroll funding or factoring program is a funding company buyout. In one example of a buyout, another funding company will pay off the prior funding company, or a bank could take over the deal. In a staffing agency sale or merger, the staffing agency buyer or an investor provides the cash for the funding company to be bought out of the deal. Generally the staffing agency has a loan balance with the funding or factoring organization that is paid off. The loan balance to be paid off will typically be in the range of 70% to 85% of the total accounts receivables.

You should be aware that some payroll funding contracts require a buyout upon termination of the total amount of the entire accounts receivables (NOT THE LOAN BALANCE). This clause can make it difficult to get out of a funding program. Most funding companies and banks will not buy out 100% of the accounts receivables. They will only pay/buyout a loan balance (70% to 85% of the A/R).

Notice any clauses in the funding contracts that require payment in full of all outstanding receivables before they will release their UCC- Uniform Commercial Code filing on your business. Notice rights to hold onto funds until all receivables are paid and all termination provisions are met.