Staffing companies face unique working capital challenges. The cash crunches nearly all staffing firms face is primarily the result of the payment terms that the staffing firm’s customers require at the outset of a relationship.
However, long payment terms in itself is not necessarily the issue. Nor is it the cash intensive nature of supplying labor or the lower margins of a service based business.
It is the inability of traditional lenders to effectively lend to staffing businesses which makes the owners’ and operators’ lives so difficult.
Consequently, many staffing companies rely on alternative financing solutions to improve their financial health – one of which is payroll funding.
What is payroll funding?
Payroll funding is a means of infusing cash into a staffing firm in order to supplement the firm’s working capital. More often than not, staffing companies are required to pay employees on a weekly or bi-weekly basis, yet their customers remit payment 15 to 30 to 45 plus days later.
This gap between when staffing companies must pay their employees and when payment is remitted by their customers causes enormous strain on cash balances.
Payroll funding is a form of accounts receivable financing that eliminates this cash gap. When the invoice or timesheets are submitted, the payroll funding company purchases the invoice which provides the staffing firm the cash needed to pay employees. The payroll funding company then collects from the staffing company’s customers when payment is remitted weeks later.
The Southern Bank’s Payroll Funding Solution
Unlike most traditional lenders, The Southern Bank is committed to partnering with small and mid-sized staffing firms. By offering Payroll Funding in addition to Traditional Lines of Credit and Asset Based Lines, The Southern Bank has a working capital solution for staffing companies regardless of a business’s life cycle.
By partnering with The Southern Bank, staffing firms benefit from:
- Direct bank funding leading to some of the lowest rates in the market
- An FDIC regulated lender that puts a premium on customer service
- The confidence in the marketplace of working with a bank
Whether you’ve been in business for two weeks or twenty years, The Southern Bank is willing to structure a payroll funding solution that meets your needs.
Staffing Industry Resources
The Southern Bank specializes in financing staffing firms. Read more about how a staffing company leveraged Payroll funding to reduce financing costs by 42.4% in our case study.