Question 1

How does invoice factoring work for a staffing agency?

Accepted Answer

A factor advances 85 to 95 percent of an approved staffing invoice within a day, holds the rest as a reserve, and releases it minus a fee when your client pays. Fees of 1.5 to 3 percent per 30 days translate to an effective annual cost of roughly 18 to 36 percent — expensive money that buys growth capacity.

Question 2

What is the difference between factoring and payroll funding?

Accepted Answer

Factoring advances cash against invoices you have already raised. Payroll funding goes further: the provider funds and often processes the payroll itself, handles employer taxes and back office, then collects from your client. Factoring is cheaper and keeps control in-house; payroll funding costs more and removes the operational burden.

Question 3

How much working capital does a staffing agency need?

Accepted Answer

Estimate weekly burdened payroll multiplied by the number of weeks between paying contractors and being paid, plus two weeks of buffer. At 30-day client terms that is roughly six weeks of payroll; at 60-day terms, closer to ten. Growth increases the requirement in proportion to headcount on assignment.

Question 4

Is payroll funding or a bank line of credit better for a staffing agency?

Accepted Answer

A bank line of credit is far cheaper but requires trading history, audited or reviewed accounts, covenants and often a personal guarantee — which most agencies under two years old cannot satisfy. Payroll funding and factoring cost more but scale with your receivables from day one and are underwritten on your clients' credit, not yours.

Question 5

What do factors check before approving a staffing facility?

Accepted Answer

Factors underwrite your clients, not you. They check debtor credit quality, your terms of business and client contracts, timesheet and approval evidence, payroll tax compliance, existing liens, and client concentration. Unpaid payroll taxes and unsigned client terms are the two most common reasons a staffing facility is declined.

Question 6

What happens if a staffing client does not pay?

Accepted Answer

You still owe the workers. Wages are due regardless of whether your client pays, so an unpaid invoice is an immediate cash loss, not a delayed one. Under recourse factoring the advance is charged back after a set period; non-recourse or credit insurance transfers the loss, at a higher fee.

Question 7

How do you fund a UK recruitment agency?

Accepted Answer

UK temp and contract agencies fund the pay-to-collect gap with invoice finance — confidential invoice discounting if you run your own credit control, factoring if you want collections handled, or a full back-office funding package that also runs payroll and compliance. Perm-only agencies can usually self-fund from fees invoiced on start date.

Question 8

What payment terms should a staffing agency ask for?

Accepted Answer

Ask for payment within 30 days of a correctly submitted weekly invoice, with a short timesheet-dispute window and interest on overdue sums. Sixty-day terms can be workable with funding priced into the bill rate; ninety-day terms are dangerous for a young agency because you pay workers for two months before collecting the first invoice.

Funding staffing payroll and growth

Start with the question closest to your desk