What is Payroll Funding in Canada?
Payroll funding is a term generally used when an accounts receivable factoring/funding company provides working capital for a temporary staffing business. The finance company provides these funds to temporary staffing agencies based on outstanding invoices to help them make payroll, pay taxes and keep up with the capital requirements of running a staffing business.
When it comes to payroll, reality is that money has to be in the staffing agency's business account when their employees are off to cash their checks Friday afternoon. A cash-flow problem often arises for many staffing businesses, even healthy ones with great margins. The staffing agency usually needs to pay their employees before their customers are paying their invoices, causing a working capital gap. The value of using a payroll funding company is it bridges this gap, giving a temp staffing business the ability to always have the working capital needed to fill orders and get all their employees paid on time.
How Payroll Funding Works
Typically a temp staffing agency will submit their invoices and timecards from the prior week to the payroll funding company. Then, the payroll funding company will fund 85%-95% of the value of those invoices to the temp staffing agency. This wire transfer will often happen the same day you submit your invoices to the factoring company, enabling almost instant cash flow as needed.
Once the customer pays the invoice, you will receive the remainder of the value of the invoice less the small fee the payroll funding company will take for providing the service. This ranges from company to company based primarily on how long it takes your customer to pay. Typical fees range from 1 to 3% of the invoice value depending on a number of factors.
Determining Customers that a Staffing Company Will Take On / Credit
A payroll funding company also provides tremendous value in helping a staffing agency monitor their customer's credit. Before initially funding invoices for a staffing company, payroll funding companies will do credit checks and analysis to make sure that the outstanding invoices are likely to get paid in a timely manner or at all. Along with that, these finance companies will often provide credit protection in case a staffing agency's customer goes bankrupt. This is often referred to as non-recourse factoring. These two elements can greatly decrease the likelihood of running into the problem of a customer not paying. It provides the insights for making good credit decisions on choosing customers and the added protection if a client goes out of business.
Many payroll funding companies will also provide online reporting that will help you stay organized and aware of how fast your customers are paying and the accuracy of those payments.
Why Meritus Capital?
Meritus has provided billions in funding to our temporary staffing clients over the past 19 years in Canada. Combined with our experience comes great service, the lowest rates and an always improving online onboarding process.
Here are a few details of our payroll funding program and why we could be the right fit for you.
PAYROLL FUNDING LINES
THE MERITUS CAPITAL DIFFERENCE
For more information on payroll funding and Meritus Capital's Solutions, please check out our many articles here or please do contact us toll-free at 1-877-648-3709.