Factoring and Payroll Funding

Many companies that use factoring tend to be very payroll intensive, which make sense. These companies need to make regular payments to their employees on a weekly basis, but their commercial customers usually pay in 30 to 60 days. So it's common to see factoring in staffing agencies and also in security agencies. The main objective in this case is to help the company meet it's payroll responsibilities. However, factoring can also be used to grow the business.

Here is how factoring in a security agency can be used for both operations and growth. Let's assume that the company is operating at it's maximum capacity and has no additional capital. It has enough to meet payroll - provided client pay on time. Obviously, factoring could be used to speed up revenues to help ensure there are always funds to meet payroll. But let's look at a different situation. Let's say that this same security company is approached by a new customer that needs it's services but will pay in net 45 days. Since the security company doesn't have any additional resources, it won't be able to hire the new guards and pay them for 45 days until they get paid - unless they use factoring. With factoring, this security guard company could secure the contract and factor the invoices - which would provide the needed funds to meet payroll. The key here would be to structure the transaction correctly so that you have factorable invoices before payroll is due.

This is just one simple example of how to use factoring to grow your business.


Learn more about invoice factoring group.