Tag Archives: payroll factoring

How does payroll factoring compare to a small business loan?

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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 www.tempay.com or call (866) 683-6729.

How TemPay can help with your company’s payroll factoring

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Payroll factors such as TemPay provide a service in which staffing agencies sell their accounts receivable invoices for a fee to obtain immediate cash. Your clients then pay the factor.

This type of staffing agency finance allows you to manage your agency’s cash flow in an industry where employees and vendors are often paid weekly while customers take 30, 45 or even 60 days to pay.

Payroll factoring is typically offered in two ways:

  • Money only. This funding solution does not provide administrative support.
  • Full service. With this option, the factor not only provides you with payroll funding but also handles your staffing agency’s payroll, invoices, taxes and collections.

Both forms provides numerous benefits, as they allow you to quickly receive the working capital you need to operate and grow your business without the hassles of the lengthy business or financial reviews of traditional financing.

Payroll factoring is also typically a more flexible form of staffing agency finance than bank funding, and factors are more likely to consider special requests, such as an overadvance.

TemPay provides both money-only and full-service payroll factoring.

We advance 90 percent or more of your invoice total, among the highest advance rates in the industry. We also offer TemPay Complete Solutions Software®, customized comprehensive software to help staffing firms perform all major front- and back-office functions and tasks.

For information on TemPay and its payroll factoring services, visit www.tempay.com or call (866) 683-6729.

How payroll factoring produces working capital

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Payroll factoring is a type of staffing agency finance in which staffing agencies sell their accounts receivable invoices for a fee to obtain immediate cash in the amount of the invoice. Your clients then pay the factor directly.

This arrangement provides your staffing firm with instantaneous working capital you can use to operate and grow your business instead of waiting the traditional 30, 45 or even 60 days for payment.

Payroll factoring provides the necessary cash flow in an industry in which you often need to pay your employees and vendors weekly while waiting for client payment on a much longer timeline.

This working capital can be used for expenses such as office lease payments, expansion, inventory, employee wages and more. It is a steady flow of income helping bridge the gap between revenue and expenses.

Payroll factoring is typically a more flexible form of staffing agency finance than bank funding, which often takes much more time and money and carries a higher risk.

Therefore, if you need additional working capital one month, say, to cover your workers’ compensation payments or open a new location, a factor is more likely to grant your request than a traditional bank.

For information on how TemPay can provide payroll factoring services that provide you with working capital, contact www.tempay.com or (866) 683-6729.

What Industries Benefit From Payroll Factoring?

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Staffing firms of all sizes and in all stages of their life cycle can receive payroll factoring, whether you are starting your own staffing agency or are established in the field and regardless of your number of clients.

Funding is available for firms in any industry, including:

  • Light industrial
  • Administrative
  • Information technology
  • Construction
  • Health care
  • Legal
  • Clerical

For example, 360° Staffing specializes in light industrial, office support and hospitality with 24-hour service and thousands of employees around the globe.

Payroll factoring has enabled CEO Carlos Sanchez to focus on growing the business, while TemPay takes care of back-office functions such as filing and paying his payroll taxes, invoicing his customers and collecting from delinquent accounts.

Many firms also provide factoring to companies outside the staffing industry, as well.

For information on TemPay and our payroll factoring services, contact www.tempay.com or (866) 683-6729.

What is an Accounts Receivable Factoring Company?

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When searching for staffing agency finance, you have probably run across accounts receivable factoring, a type of funding in which you sell your accounts receivable to the factoring company for a cash advance. Your clients then pay the factor directly.

 

Firms of all sizes and in all stages of their life cycle can receive accounts receivable factoring, whether you are just starting a temp agency or established in the field, and whether you have five clients or 50.

 

Funding is available for firms in any staffing industry, whether it is light industrial, administrative, IT, construction, health care, legal or clerical. Many firms also provide factoring to companies outside the staffing industry, as well.

 

Factoring aids your staffing firm by providing quick and easy cash to fund your business in an industry in which companies often suffer from cash flow gaps.

 

There are typically eight easy steps to receive accounts receivable factoring.

  1. Contact your factor’s sales department.
  2. Your sales representative will collect information about your staffing business.
  3. Complete a credit application form and provide client information.
  4. Your factor performs a credit check on you and your business.
  5. Your factor approves your credit.
  6. Your factor meets with you to discuss rates, terms and conditions.
  7. Your factor collects additional information as needed.
  8. Your factor provides you with a draft contract that includes terms, conditions and rates.

 

For information on TemPay and our payroll factoring services, contact www.tempay.com or (866) 683-6729.

TemPay Answers Your Top Client Questions

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At TemPay, we receive questions about our payroll factoring services all the time. Here, we answer your top client questions.

What type of businesses do you factor?

TemPay’s main clientele is temporary staffing firms in any industry, including light industrial, administrative, information technology, construction, health care, legal, clerical and many others.

We also provide factoring services to businesses that regularly invoice creditworthy commercial customers.

We’ve factored companies in the staffing, IT, software, advertising, security services, auto, manufacturing and transportation industries. 

What size clients does TemPay service?

Firms of all sizes and in all stages can receive payroll funding, whether you are just starting a temp agency or established in the field, whether you have five clients or 50.

Are there any restrictions on a client’s location?

No. TemPay serves clients throughout the United States.

Are there restrictions on the location of a client’s customers?

No. Your clients can be anywhere in the United States.

Understanding Recourse and Nonrecourse Factoring Services

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Most staffing agencies choose payroll factoring as their type of staffing agency finance. With factoring, staffing firms sell their accounts receivable invoices for a fee to the factor and gain cash up front to pay their employees and other parties.

There are two different types of factoring.

  • Recourse – With recourse, the staffing firm assumes the risk and losses for unpaid invoices. As a result, the staffing firm must buy back invoices that their customers don’t pay in a fixed amount of time.
  • Nonrecourse – With nonrecourse, the factor assumes the risk of bad debt and is out the money that it is unable to collect. This is safer for the staffing agency but riskier for the factor. This method is often used in 80/20 rule situations, in which 80 percent of your business comes from 20 percent of your clients, and if they failed to pay, your business would suffer greatly.

TemPay provides the former, recourse funding. Most factors provide this type of funding because it carries less risk. If a factor does offer nonrecourse funding, it typically comes with a significant fee.

For information on TemPay and its payroll factoring services, contact www.tempay.com or (866) 683-6729.

Factors Do More Than Payroll Funding: Full-Service Support

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While payroll funding is a huge part of every staffing firm factor’s business, it’s not the only service a factor provides.
Factors offer a type of staffing agency finance called payroll factoring. With factoring, staffing firms sell their accounts receivable invoices for a fee to factors and gain cash up front to pay their employees and other related parties.

 

Unlike traditional financing, temporary agency payroll funding provides cash quickly without the hassles of lengthy business and financial reviews.

 

Full-service payroll funding provides back-office administrative services that allow you the freedom to focus on growing your business while the factor handles the details, such as filing payroll taxes, sending invoices and collections. Look for a factor that can:

 

  • Pay your temporary employees via check, direct deposit or payroll card
  • File and pay your staffing firm’s payroll taxes
  • Invoice your customers
  • Collect from your customers and follow up on delinquent accounts
  • Monitor creditworthiness of your customers
  • Deliver certainty with one low, fixed fee
  • Prepare extensive management reports on the administrative and financial activity of your firm
  • Provide software to manage your office

Your factor should also operate as a virtually invisible partner. Your employees and customers should see your temporary staffing firm’s name on their checks and invoices, and the factor should perform collection assistance as a representative of your company, providing the same great customer service your customers have come to expect.

 

Staffing Firm Finds Success With Temporary Payroll Funding

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Operating a staffing firm is no easy task, as Carlos Sanchez, CEO and president of 360° Staffing, has discovered. When he founded his business in 2007, he knew it would require a lot of hard work. However, he has gotten assistance from a factoring partner that alleviates his temporary payroll funding needs, allowing him to focus on building and managing his business.

 

Immediate availability

As a staffing firm specializing in light industrial, office support and hospitality, with 24-hour service and thousands of employees around the globe, 360° Staffing needs a temporary payroll funding partner that understands its business needs and is ready to step in at a moment’s notice.

“Having a payroll funding factor stabilizes my costs,” Sanchez says. “My factor has been instrumental in understanding my needs as I grow and helping me fund new projects.”

For example, during Hurricane Sandy, 360° Staffing placed hundreds of employees in damaged areas to help with cleanup and rebuilding. Sanchez notified his factor that he would be upping his workforce, and the company assured him it had his back.

“I went out on the beaches myself to assist the recruiters, find people to work and prepare the employees for how to do their jobs,” he says. “Having my funding taken care of took away a big headache so I could focus on the task at hand.”

 

Seamless funding

Sanchez is a hands-on boss who leads through example, arriving at the office early and leaving late. He also strives to interact with his employees and has been known to drive temporary employees to and from job sites or buy them a meal.

“I believe my example motivates my employees,” Sanchez says. “They see me and have access to me. They know I’m just like them. Having a factor that handles my payroll gives me the time I need to focus on these interactions and therefore grow my business.”

 

Constant communication

For Sanchez, having a factor with horizontal communication is key. He has a key employee at 360° Staffing who works directly with the payroll funding company’s employee, who has a similar job function. This relationship allows 360° Staffing to submit client applications and soon after, receive detailed information on the client.

“With previous factors, they would only tell us whether the client was approved or not,” Sanchez says. “Now, we have a dialog, and the factor tells us why the client didn’t rate well and how we can modify contract terms for an individual client. They really partner with us and have our best interests in mind.”

Sanchez also maintains communication with the top management at his payroll funding company, who keep him abreast of what’s going on in the industry and who let him know of potential acquisitions.

 

For information on how TemPay can manage your payroll effectively and affordably, contact www.tempay.com or (866) 683-6729.

Useful Links For Staffing Firms

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Looking for more places to find information about staffing? Check out our useful links page, which includes everything from the U.S. Small Business Administration to Essential StaffCARE, which provides health insurance for temporary employees.

And, as always, don’t forget to continually check our blog, which provides helpful staffing firm information from A to Z, including information on how to start a temporary agency, payroll factoring, managing your staffing firm and more.