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:

  1. The client sells its unpaid invoices to a payroll funding provider known as a factoring company
  2. The factoring company advances the client up to 90% of the value of the outstanding invoices
  3. 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