Staffing Invoice Factoring | FundThrough

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Best Invoice Factoring for Staffing Companies

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What's in this guide

  1. What Is Staffing Factoring?
  2. Why Do Staffing Firms Often Need Staffing Factoring?
  3. Benefits of Invoice Factoring for Staffing Companies
  4. Types of Invoice Factoring for Staffing Companies
  5. How Staffing Invoice Factoring Works
  6. Qualifications for Factoring for Staffing Companies
  7. What Should Staffing Companies Look For in a Factoring Company?
  8. Should You Choose Invoice Factoring or a Bank Line of Credit?
  9. Staffing Invoice Factoring FAQs

If you're considering staffing factoring for your business, it's good to know what's involved in the process. Having a solid background of knowledge on staffing factoring itself — including what it is, how it works, and how to choose the best staffing factoring company for your needs — is key to making sure you're getting the most out of this innovative funding solution.

Besides simply knowing what staffing factoring is, you should also have a solid understanding of how invoice factoring for staffing companies like yours can help you run your business with less stress and fewer cash flow shortages. You should also know what's involved in qualifying for staffing factoring, and how to pick a partner that will best meet the needs of your business.

At FundThrough, we work with many staffing companies to help them free up cash flow and say goodbye to the hassle of extended payment terms. We're also entrepreneurs, so we understand the challenges of not having enough cash flow and how difficult it is to be stuck waiting on customer payments — especially when you need capital to make payroll or go after growth opportunities.

What Is Staffing Factoring?

Staffing factoring is a type of short-term financing that gives you fast access to working capital. It sometimes goes by the names recruitment invoice factoring or invoice financing. To that end, staffing factoring is simply invoice factoring for staffing agencies. Here's how it works: your business sells its outstanding invoices to a factoring company, who gives you an advance on the value of your invoice, minus a small fee. The staffing factoring company then works with your customer to settle the invoice according to the original payment terms.

Staffing companies like invoice factoring for a number of reasons, including its less strict eligibility requirements — many staffing companies qualify — and the fact that it doesn't require you to have a lengthy credit history or a perfect credit score.

Why Do Staffing Firms Often Need Staffing Factoring?

Staffing firms like yours often need staffing factoring, or temporary staffing factoring, for a few different reasons, including:

Making Payroll

Without the ability to pay the people you place, you'll have a negative reputation — and no temporary workers to place — in no time. Staffing factoring can help you ensure you always have cash in the bank to pay your people on time.

Clients Don't Pay Quickly Enough

The other big reason staffing firms need a funding source like staffing factoring is that their clients take a long time to pay them. It's not unheard of for staffing companies to wait 30, 60, or even 90 days or longer for payment. Factoring helps remove this stress by funding staffing agency invoices in a matter of days, rather than according to the lengthy net terms that are often the industry standard.

Growth Opportunities

Without enough cash on hand, it can be difficult to cover everyday expenses and go after big recruiting jobs. These growth opportunities let you grow your business, but you need to be able to pay even more people before your client pays you. Staffing factoring can help bridge any cash flow gaps you experience during periods of growth.

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Staffing Factoring: Benefits of Invoice Factoring for Staffing Companies

Factoring is one of the most common types of funding for staffing companies and temp agencies. Here are just some of the benefits our staffing company clients say they appreciate:

Quick Funding for Payroll

Staffing firms are often stuck waiting weeks or even months to get paid by their clients, which causes all sorts of cash flow difficulties. With staffing company factoring, you can get outstanding invoices paid in a matter of days instead of waiting on extended net terms, so you always have payroll funding.

Flexible Funding

Small business invoice factoring lets you get the funding you need, when you need it, even on short notice. With FundThrough, there's no minimum funding obligation every month, no long-term commitment after the invoice is paid, and no need to fund every invoice — plus access to unlimited funding.

No Debt

Because invoice factoring is not a loan, you don't have to worry about repaying the advance — your customer pays the invoice factoring company according to the original payment terms.

No Dilution

Invoice factoring for staffing firms is a source of non-dilutive funding. This means you get to keep ownership of your company, without giving away control of your business.

No Bank Hassles

Traditional banks are notorious for taking months to approve a business loan or line of credit, even if you're just looking for an increased limit. If they don't reject you outright due to a limited or bad credit history, they'll require a ton of paperwork. With factoring, you can get funding in just days.

Easy Process

Traditional banks often have a lengthy, confusing application process, while factoring requires very little paperwork — you can apply in minutes. At FundThrough, we use our own mix of automation, AI, and accounting integration with QuickBooks to make it especially easy.

Easier to Qualify

While conventional lenders insist you have a good credit score to qualify for funding, with staffing agency factoring it's not as important. Your customer's creditworthiness is what matters most, since they're the ones paying the invoice to the factoring company.

Types of Invoice Factoring for Staffing Companies

Many types of staffing companies can benefit from invoice factoring, including:

  • Healthcare and medical staffing agencies
  • Human resources staffing companies
  • Consulting staffing firms
  • Administration staffing companies
  • Manufacturing staffing companies
  • Accounting staffing agencies
  • IT staffing companies
  • Warehouse staffing
  • Headhunters
  • Payroll companies
  • Finance staffing firms
  • Industrial staffing
  • Janitorial
  • Office and clerical
  • Professional staffing companies
  • The government

How Staffing Invoice Factoring Works

It's not uncommon for a staffing agency to wait four weeks or more after placing workers to get paid by a client, even though you cover all the costs up to that point. Here's a brief summary of how factoring works with FundThrough.

1

Fill Placements & Submit Invoices

Fill job vacancies for your clients, then submit invoices for the completed work.

2

Send Invoices to FundThrough

Submit your approved, unpaid client invoices to FundThrough.

3

Get Funded

FundThrough advances the full value of the invoice in days, minus a small fee.

4

Put Capital to Work

Use your funds to cover payroll, operational expenses, or take on new growth projects.

5

Collection & Repeat

FundThrough waits for your customer to pay the outstanding invoice according to the original terms — then you repeat the process for your next placement.

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Staffing Invoice Factoring Costs

Factoring rates vary across different staffing and recruitment factoring companies and are based on their own specific criteria, so we can only speak for FundThrough. With us, you'll always know the cost of factoring before you fund an invoice. We don't charge hidden fees, and there is no cost to open an account. See our pricing page for more info.

Staffing Invoice Factoring Terms

Terms vary, as do many of the requirements of each factoring company. Here are a few things to look for when evaluating invoice factoring terms:

  • Are you required to factor every invoice, or at least a minimum number or dollar amount of customer invoices every month?
  • Are you being charged hidden factoring fees, such as an account startup fee, wire transfer fee, or invoice processing fee?
  • Are you going to be locked into a long-term contract?

Evaluating the terms now will save you time, trouble, and a cash flow nightmare later. FundThrough has no minimum monthly funding requirements, no hidden fees, and zero long-term commitments after invoices are paid.

Qualifications: Is Factoring for Staffing Companies Right for My Business?

While qualifications vary across different staffing factoring companies, typical requirements include selling to other businesses, having creditworthy customers, and having a managed tax balance with the IRS and/or CRA. See if you qualify for FundThrough here.

"When Ace Recruitment landed a client with 45-day payment terms, they were billing tens of thousands of dollars a week. So they asked themselves: how could they keep making payroll for six weeks without that kind of capital in hand? The answer was FundThrough."

— Sami Boubertakh, Account Manager, Ace Recruitment

Factoring Companies for Staffing Agencies: What to Look For

If you're evaluating different companies in your search for invoice financing for recruitment agencies, or any other type of invoice factoring for your staffing firm, ask each candidate you're considering about these points.

Experience with Staffing Companies and Agencies

A factoring company that has experience in the staffing industry can make the process easier for you, and give you confidence that the factoring company can help. FundThrough is very experienced with helping staffing companies grow and make weekly payroll, with the track record to prove it.

Quick and Easy Setup

Many funding companies for staffing agencies still use manual, paper-based processes that slow down the factoring process and waste your time. Look for an invoice factoring company that uses technology to help streamline and speed up the process.

Competitive Rates and Flexible Terms

It's probably no surprise that the best factoring companies for staffing agencies are transparent about their fees and offer 100% advance rates. A company with a low rate could end up charging hidden fees, so you need to know about all fees upfront — and don't forget to compare advance rates too.

Should You Choose Invoice Factoring or a Bank Line of Credit?

If your staffing agency struggles with consistent cash flow, you might consider a bank line of credit — if you qualify and aren't too new — or choose to factor your unpaid invoices with a staffing agency factoring company. Both have advantages and disadvantages to consider, and both can work together for customized funding solutions.

Line of Credit

A revolving facility from your bank that you draw on as needed and repay over time.

Pros

  • Convenient capital to draw on anytime.
  • Like a credit card, a LOC gives you the flexibility to borrow what you need, when you need it.
  • LOCs allow you to build your credit history and credit score.
  • You only pay interest on the money you borrow.

Cons

  • You can hit your limit quickly if you have a big growth project that requires a large sum of capital.
  • Fees and extra charges can add up, especially if you fail to make payments.
  • You are personally responsible for any LOC debt if your business fails.
  • Banks often won't work with companies that are too new.
  • A lengthy approval process means it can take months to qualify for a line of credit.

Invoice Factoring

Selling your unpaid invoices to a factoring company for an immediate cash advance.

Pros

  • You get access to funding in days, not months.
  • You get an advance on money you've already earned.
  • No debt on your books.
  • No dilution of your business.
  • Easier to qualify for than a LOC.
  • Fast and easy setup.
  • Unlimited capital (with FundThrough only).

Cons

  • Many small businesses are concerned about the factoring company contacting their customers. FundThrough treats every customer interaction with care and professionalism.
  • Some businesses worry that factoring will complicate their bookkeeping — in practice, recording factoring transactions in accounting software like QuickBooks is straightforward with a bit of guidance.

Staffing Invoice Factoring FAQs

Whether your agency specializes in temp work or professional recruiting, you might wait weeks or months to get paid for your services. That's a long time to wait for the funds you need to run your business. You can turn invoices into cash by using money from factoring to meet your financial obligations, including making payroll, paying overhead and operating expenses, buying supplies, and keeping the lights on while waiting on invoice payments to come in.

Staffing funding companies advance you a percentage of your total outstanding invoices upfront, and then collect the full amount from your customer.

The importance of a payroll factoring program to finance payroll expenses cannot be taken lightly. It gives you the flexibility to factor only the invoices you choose. You have unlimited funding potential, your employees are paid on time — which builds loyalty — and you get the support you need to grow. Staffing payroll factoring also helps you navigate cash flow challenges and manage working capital, so you can get back to work instead of worrying about financial stability and chasing down outstanding receivables.

Both invoice factoring and bill discounting provide you with working capital in exchange for your accounts receivable / unpaid invoices. But they are different in other ways.

Invoice factoring: When a company sells its accounts receivable or unpaid invoices to a third party, called a factor, it is called invoice factoring or business factoring. You are paid for work already done, and can acquire quick cash without waiting for invoices to be paid by slow-paying customers.

Bill discounting: Also called invoice discounting, bill discounting generates working capital from future payables. Essentially, it is the advance sale of an invoice (or bill) to a discount business or financial institution before the bill is due.

How can staffing firms use money from factoring?

Whether your agency specializes in temp work or professional recruiting, you might wait weeks or months to get paid for your services. That's a long time to wait for the funds you need to run your business. You can turn invoices into cash by using money from factoring to meet your financial obligations, including making payroll, paying overhead and operating expenses, buying supplies, and keeping the lights on while waiting on invoice payments to come in.

Staffing funding companies advance you a percentage of your total outstanding invoices upfront, and then collect the full amount from your customer.

Simple. Intuitive. Staffing Invoice Factoring.

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