Hello, I'm Paul DeLuca, founder of Meritus Capital. Today, we're talking about payroll funding advance rates or factoring advance rates, specifically how they relate to the temporary staffing industry.
Many times you will see different rates advertised from 70%, 80%, 90% or even 100%. But what exactly is being talked about? Well, there's really two variances that are extremely important to make sure you have figured out. Is the advanced rate based on a factor of the invoice that you're sending to your client? Or is it based on a factor of what your employee's cost is?
This is a big issue because a 100% advance rate, if that is really just the employee payroll portion, this could actually only be maybe 75%, 80%, or 85% of the invoice. My advice is to make sure that you know exactly what the advance rate is based on the invoice to your client. This enables you to make sure you have the most capital you need to not only pay your payroll each week but also pay all of your bills and office expenses. So, what's a great advanced rate? Well really, even a 90% to 95% advance rate on the invoice is possible.
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