A Staffing Agency’s Ongoing Interactions with a Payroll Funding Company
Steve Capper, Principal/CEO/Flexible Funding - July 19, 2017
Payroll funding or commercial lending to staffing agencies involves much more than just transferring money and collecting interest. As this lending is secured only on paper invoices and time cards, it is high risk lending. If anything goes wrong, staffing agencies do not have real estate, heavy equipment, inventory, etc. to lien and liquidate. Most agencies are poorly capitalized and funding companies must constantly monitor their customer’s accounts receivables and collections.
The primary objective of funding companies is analyzing and monitoring accounts receivables to repay the loan so payroll funds and profit can be advanced on payday. There is no absolute foolproof way to provide temp agency financing. Every funding company does their best to minimize bad debt losses.
Behind the scenes, payroll funding companies do a tremendous amount of work requiring extensive time, expertise and expense. If a staffing payroll-funding company quotes you a price that seems significantly below the cost of other payroll lenders, there is probably a catch. Nearly all accounts receivable factoring and lending companies have to do the same due diligence, information collection, setup, monitoring, servicing, and continuous problem solving. A small glimpse into the world of staffing agency funding and a few of the cost items covered by the fees are as follows:
Lending to staffing agencies on invoices as the only means of repayment is risky and credit is a constantly moving target. Over the course of a funding relationship between a funding company and a staffing company, any of these items can affect your daily interactions.