Definition
Financing that advances against invoices to cover payroll.
Why it matters
Common for staffing, security and home-care companies.
Where it shows up in a deal
Staffing, home-care and security companies run payroll weekly while their clients pay in 30 to 60 days, so the facility is built around the payroll calendar: invoices are submitted after timesheets are approved, and funding is timed to land before the payroll draft. Some providers bundle payroll processing and tax filing with the funding.
What it affects
- Approved timesheets are the proof of delivery, so approval delays become funding delays.
- Funding has to clear before the payroll draft date, which makes cut-off times more important than rates.
- Employer taxes and workers' compensation are part of the cost being funded, not an afterthought.
- Advance rates are typically high because client-approved hours leave little room for later deductions.
A worked example
An agency bills $250,000 a month and pays about $185,000 of wages and employer taxes. Weekly billing of $62,500 funded at a 92% advance delivers $57,500 within a day, against roughly $46,250 of weekly payroll cost.
The common mistake
Related terms
- Invoice FactoringSelling unpaid invoices to a factor for an immediate advance.
- Advance RateThe percentage of an invoice's value a funder pays upfront.
- Working CapitalCurrent assets minus current liabilities — the cash available to run daily operations.
- Cash FlowThe net movement of cash into and out of a business over a period.
Questions about how payroll funding affects your facility?
Call (929) 658-8087 or request a written quote — no obligation, no credit impact.
