Free tool · Staffing agencies
Payroll funding calculator
The short answer
A staffing agency needs roughly one week of loaded payroll for every week clients take to pay. Twenty-five workers at $18 an hour with 20% burden and net-45 clients means about $150K out the door before the first check lands. Payroll funding commonly advances 85% to 90% of each invoice, which typically covers payroll from week one.
You fund $21,600 of payroll every week, but the first client check does not arrive until about day 52. By then you have paid out $151,200 with nothing coming back. Once collections start, each week’s $4,500 gross profit slowly chips away at the hole.
Cumulative cash position, first 12 weeks
What a factoring facility would cover
- At a 90% advance, each week’s invoices bring in about 108.7% of that week’s payroll, so the facility typically covers payroll without you fronting cash, as long as you invoice every week.
- At a 90% advance you cover about 108.7% of payroll. The shortfall of about $0 a week has to come from your own cash. A thin markup is usually the cause.
Cost assumes the fee accrues in proportion to days outstanding: 2.5% per 30 days × 45 days ≈ 3.75% of each invoice, on about $113,100 a month of billings. Real pricing depends on your clients’ credit, volume and the funder.
- Factoring would eat most of your margin at these numbers. Look at your markup, burden or client terms before taking on a facility.
How much working capital does a staffing agency need?
Plan on about one week of loaded payroll for every week your clients take to pay, plus a cushion. You pay workers weekly or every two weeks, but clients pay 30 to 60 days after the invoice, often later. Every week of the gap is another full payroll you fund yourself before collections catch up.
Loaded payroll means wages plus burden: employer payroll taxes, workers’ comp, unemployment insurance and any benefits. Burden commonly adds 15% to 30% to wages depending on state and job class. Leaving it out is the most common reason agencies underestimate how much cash they need.
How does payroll funding work for staffing companies?
Payroll funding is invoice factoring built around the staffing cycle. You invoice clients for approved hours each week, the funder advances a percentage of those invoices, typically within a day or two, and you use that cash to make payroll. When the client pays, you get the remaining balance minus the fee.
Because markup sits on top of payroll, an 85% to 90% advance on the bill rate usually covers the loaded payroll for those hours. If your markup is thin, the advance may fall short, and the calculator shows by how much. Read more on payroll funding and on factoring for staffing agencies.
Is payroll funding worth the cost?
It depends on your margin and on what the cash lets you do. Factoring fees commonly run roughly 1% to 5% of invoice value per 30 days. On a 17% gross margin, a 3.75% effective fee leaves about 13.5%. That is a real cost, but it may be cheaper than turning down a contract or missing payroll.
Watch the margin after factoring closely. If it drops below the mid single digits, fix pricing first: renegotiate markup, tighten client terms or drop slow payers. Compare fee structures with the factoring cost calculator.
How is this calculated?
Weekly payroll is workers × hours × pay rate × (1 + burden). Weekly billings are wages × (1 + markup). Each week is invoiced at week end, and clients pay that invoice after your stated terms. Payroll goes out at each week end, or every second week end for biweekly payroll.
- Gap before first payment: payroll paid before the first client check arrives.
- Peak working capital: the deepest point of the cumulative cash line without factoring.
- Monthly factoring cost: monthly billings × fee per 30 days × (terms ÷ 30), assuming the fee accrues with days outstanding.
- Gross margin after factoring: gross profit minus factoring cost, divided by billings.
Questions people ask
What advance rate do staffing factors offer?
Staffing advances commonly run about 85% to 90% of the invoice, depending on your clients’ credit, concentration and your track record. Clients with strong credit and clean timesheet approval tend to get the higher end.
Can a new staffing agency get payroll funding?
Often, yes. Payroll funders lean on your clients’ creditworthiness, so a new agency with solid clients can qualify. Expect closer review of timesheet approvals and workers’ comp coverage in the first months.
What markup do I need for payroll funding to work?
Your markup has to cover burden, the factoring fee and your overhead. If the advance on your bill rate is below your loaded payroll cost, you will still need cash of your own each week. The calculator flags when that happens.
Does payroll funding cover payroll taxes?
The advance is cash you can use for any payroll cost, including employer taxes. Funders will often verify that payroll taxes are current, because unpaid trust-fund taxes can create IRS liens that come ahead of the factor.
How fast can a staffing agency get funded?
Once the facility is set up, advances typically arrive within one to two business days of submitting invoices. Initial setup commonly takes one to three weeks, depending on how quickly clients can be verified.
Weekly or biweekly payroll: does it change how much I need?
Biweekly payroll lets you hold cash a little longer, which can reduce the gap slightly. But the total you fund before the first client payment is similar. The chart shows both patterns.
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