Payroll Funding
Payroll funding is a type of business financing in which businesses sell their receivables for cash up front. Payroll funding, also known as invoice factoring, is a common form of financing for staffing companies in particular since they often need to make payroll on a weekly basis but get paid by their customers on a less frequent basis, such as bi-weekly or monthly.
The payroll funding process is as follows:
- The client sells its unpaid invoices to a payroll funding provider known as a factoring company
- The factoring company advances the client up to 90% of the value of the outstanding invoices
- The client’s customers pay their invoices by sending payment to the factoring company
Once the invoices are paid, the factoring company releases the remaining invoice value to the client, minus a small factoring fee
